1997 ANNUAL REPORT
Janus Income Funds
Janus Flexible Income Fund
Janus High-Yield Fund
Janus Federal Tax-Exempt Fund
Janus Short-Term Bond Fund
Janus Money Market Fund
Janus Government Money Market Fund
Janus Tax-Exempt Money Market Fund
[Logo] JANUS
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TABLE OF CONTENTS
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Our Message to You 1
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Portfolio Manager's Commentary and Schedule of Investments
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Janus Flexible Income Fund 2
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Janus High-Yield Fund 6
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Janus Federal Tax-Exempt Fund 10
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Janus Short-Term Bond Fund 13
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Janus Money Market Fund 16
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Janus Government Money Market Fund 20
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Janus Tax-Exempt Money Market Fund 21
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Statements of Operations - Bond Funds 24
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Statements of Assets and Liabilities - Bond Funds 25
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Statements of Changes in Net Assets - Bond Funds 26
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Financial Highlights - Bond Funds 27
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Statements of Operations - Money Market Funds 29
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Statements of Assets and Liabilities - Money Market Funds 29
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Statements of Changes in Net Assets - Money Market Funds 30
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Financial Highlights - Money Market Funds 31
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Notes to Schedules of Investments 32
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Notes to Financial Statements 32
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Report of Independent Accountants 35
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Performance Information
Performance overview graphs on the following pages compare the performance
of a $10,000 investment in each Fund since its inception to one or more widely
used market indexes. Each graph reflects the lifetime performance of the Fund
through October 31, 1997.
When comparing the performance of a Fund to an Index, keep in mind that
market indexes do not take into account brokerage commissions that would be
incurred if you purchased the individual securities in the Index. They also do
not include taxes payable on dividends, interest payments, or operating expenses
necessary to maintain a portfolio investing in the Index.
Average annual total returns are quoted for each Fund. Average annual total
return is calculated by taking the growth or decline in value of an investment
over a period of time, including reinvestment of dividends and distributions,
and then calculating the annual compound percentage rate that would have
produced the same result had the rate of growth been constant throughout the
period.
An Explanation of the Schedule of Investments
Following the performance overview is each Fund's Schedule of Investments.
This schedule reports the industry concentrations and the different types of
securities held in the Fund's portfolio on the last day of the reporting period.
Securities are usually listed by type (common stock, corporate bonds, U.S.
government obligations, etc.) and by industry classification (banking,
communications, insurance, etc.).
The market value of each security represents its value on the last day of
the reporting period. The value of securities denominated in foreign currencies
is converted into U.S. dollars.
An Explanation of the Forward Currency Contract Table
A table listing forward currency contracts follows each Fund's Schedule of
Investments (if applicable). Forward currency contracts are agreements to
deliver or receive a preset amount of currency at a future date. Forward
currency contracts are used to hedge against foreign currency risk in the Fund's
long-term holdings.
The table provides the name of the foreign currency, settlement date of the
contract, the amount of the contract, the value of the currency in U.S. dollars,
and the amount of unrealized gain or loss. The amount of unrealized gain or loss
reflects the change in currency exchange rates from the time the contract was
opened to the last day of the reporting period.
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OUR MESSAGE TO YOU
Dear Shareholders:
Over the last 12 months, the U.S. bond market has gone through two distinct
periods when two different economic backdrops unfolded. After the economy picked
up steam in the first half, more moderate growth prevailed toward year-end.
However, the 30-year U.S. Treasury Bond stayed within a relatively narrow
trading band. The long bond saw a high of 7.17% in mid-April, but more recently
it traded sharply lower, at 6.15%.
Our economy remains highly sensitive to any movement in interest rates,
which reflects a more efficient environment. An uptick in rates acts as a
braking mechanism on growth. And, conversely, the economy quickly perks back up
when rates drop. Technological advancements have allowed companies to operate
more efficiently, and they can now respond quickly to economic changes. That is
what we are experiencing: a truly efficient economy that is enjoying the
benefits of a broad increase in efficiency and productivity. This has generally
helped control inflation, and explains why the economy remains so sensitive to
the rate movements.
The Economy in Review
Late in 1996 and continuing into 1997, domestic growth picked up rapidly,
and yields rose. With any spike in growth, the threat of inflation - real or
perceived - takes on increased relevance, and this year was no exception. To
stem any potential inflationary pressures, the Federal Reserve raised rates by
25 basis points late in March. Keeping inflation low is the Federal Reserve's
number one priority, and its preemptive strike served to keep inflation in
check.
Following the rate hike, the U.S. economy moved into a "Goldilocks
Scenario," where everything was just right. Economic growth was solid, and there
was little to no inflation, low unem-ployment, and robust corporate earnings.
While growth moderated slightly, inflation remained subdued, and the Federal
Reserve stayed on the sidelines.
More recently, the growing turmoil in the Far East and other emerging
markets induced international volatility, sending global stock markets
dramatically lower at one point. Additionally, the devaluation of Southeast
Asian currencies creates the very real possibility that deflationary pressures
will become global. This would certainly diminish pricing pressures here at
home. Meanwhile, the growing fluctuations were unsettling, and many investors
sought safe haven in quality issues. U.S. Treasuries are seen as one of the
safest investments in the world, and the 30-year U.S. Treasury bond was a direct
beneficiary of this flight to quality. Rates on the long bond ended the period
near the low end of their trading range.
Fixed-Income Sector Performance
During the year, high-yield bonds performed well. The sector generally
offers exciting potential, and there was no shortage of corporate offerings. New
issuance surged, totaling over $108 billion in calendar 1997. In general,
high-yield debt is closely tied to the stock markets, and the combination of a
rising equity market and low yields on Treasuries made this asset class even
more appealing.
Investment-grade bonds also posted good results, narrowing the spread (or
yield difference) with U.S. Treasuries. While inflation remained mild, earnings
proved solid, and corporate balance sheets improved as companies reduced debt
burdens.
As mentioned earlier, the financial troubles in the Far East resulted in a
flight to quality, and the U.S. Treasury markets were the prime beneficiary.
Meanwhile, emerging market debt came under tremendous selling pressures. A
number of factors combined to the detriment of emerging markets. Currency
speculation swirled around Southeast Asia, and eventually impacted Latin
American markets as well. Central banks were forced to either devalue their
currencies or raise interest rates to stem speculation. However, lack of
economic growth and credit rating downgrades removed the foundation from this
sector, which ended the period with sharp losses.
Our Funds' Strategy
Despite a skittish and often volatile environment, we managed to post good
results, and a number of our fixed-income funds ended the year near the top of
their peer groups. While we paid careful attention to interest rate movements
during the year, our flexibility paid dividends by allowing us to capitalize on
a wide array of invest-ments. Whenever possible, we sought to minimize price
volatility and maximize our yields. Although we were a little more defensive
toward the end of the fiscal year, we still managed to perform well overall.(1)
Looking Ahead
The argument for solid domestic growth remains intact, and inflation has
been a virtual no-show. Unemployment levels are at a 24-year low, and home sales
have picked up, due in large part to the decline in long-term yields. While it
may seem contradictory, any signs of weakness may actually improve the economic
backdrop. Consumer spending slowed from its rapid pace during the second quarter
as people began to pay down credit card debt and place more in savings.
Additionally, some individual commodity prices, such as copper, are much lower.
This minimizes the pricing pressures on manufacturers and keeps an effective lid
on inflation. Add in stable oil prices and declining technology prices, and we
now have the underpinnings for a stable economy going forward.
/s/ Thomas H. Bailey
Thomas H. Bailey
Chairman
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(1) Past performance does not guarantee future results.
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 1
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JANUS FLEXIBLE INCOME FUND
Portfolio Managers, Sandy R. Rufenacht, Ronald V. Speaker
Performance
Janus Flexible Income Fund returned 11.48% for the fiscal year ended
October 31, 1997. The Lehman Brothers Government/ Corporate Bond Index returned
8.81%. Both returns include reinvested dividends.
The U.S. bond market went through two very distinct periods during the last
12 months. For the first half, signs of rapid economic growth combined with an
increasingly tight labor market to ignite inflationary jitters, which sent
yields on the 30-year Treasury bond sharply higher, peaking at 7.17%. To halt
any buildup in inflationary pressures, the Federal Reserve took a preemptive
strike against inflation in March, raising short-term rates 25 basis points.
The second half of the year proved vastly different. Growth moderated and
the economy moved into the "Goldilocks Scenario" (everything is just right):
mild inflation, robust earnings, and low unemployment. Bonds received the news
well, and clearer evidence of mild inflation helped yields fall dramatically. As
the period came to a close, the growing turmoil in international markets sparked
a flight to quality, which sent yields on the long bond down to 6.15%.
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Fund Profile October 31, 1997 October 31, 1996
Weighted Avg. Maturity 9.4 Yrs. 8.2 Yrs.
Average Modified Duration* 5.6 Yrs. 4.9 Yrs.
30-Day Avg. Yield** 6.61% 8.15%
Average Rating BBB BBB
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*A theoretical measure of price volatility.
**Yields will fluctuate.
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Portfolio Asset Mix October 31, 1997 October 31, 1996
Investment-Grade
Corporate Bonds 33.2% 30.0%
High-Yield/High-Risk Corp. Bonds 38.7% 47.0%
U.S. Government Bonds 14.9% 9.5%
Foreign Non-Dollar Bonds 1.2% 0.1%
Preferred Stock 2.1% 2.0%
Cash & Cash Equivalents 9.9% 11.4%
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Portfolio Strategy
We maintained our diversified strategy during the year, especially in light
of the broad fluctuations in interest rates. We sought to mitigate risk while
maximizing yield, and boosting total returns in the process. Overall, the Fund
emphasized investment-grade bonds, some Treasuries, and a number of high-yield
securities.
Credit spreads, or the difference in yield between investment-grade debt
and government securities, tightened during the year, helping highly rated
corporate debt outperform their Treasury counterparts. Solid economic growth
allowed corporate earnings to ramp up, and companies in turn used the proceeds
to pay down debt and improve balance sheets. Among our investment-grade bonds,
banks and financial services companies performed well, including Delphi
Financial, a disability and life insurer.
We also did well in the high-yield bond arena. This is where research is
truly important, and a hands-on, detailed approach can pay off handsomely. The
high-yield, or "junk" bond, market is closely tied to the equity market, and we
were able to leverage our ideas with Janus' equity research. Detailed analysis
allows us to gain better insight into the credit worthiness of our investments.
We cannot only pick up higher yields, but we have also been able to enhance our
total return through bond appreciation. Overall, this is an exciting sector. As
interest rates continue to fall, the higher-yielding coupons of lower-quality
debt are becoming increasingly attractive. Supermarkets are one area of the
high-yield market that have performed exceptionally well for us. This is a
stable business, and a wave of consolidation is currently sweeping through the
industry. We owned Ralph's Grocery, which is benefiting from the booming
California economy, and Star Markets, which operates in the Connecticut and
Boston area. We were able to clip good coupons with low volatility.
Telecommunication companies were another exciting area because deregulation
is making major changes to the industry. The regional Bell operating companies
are now competing with local exchange carriers, and this is good news for
consumers who receive better service at lower rates. Metronet, Iridium, and
Worldcom bonds helped Fund performance. However, not all ideas worked out and we
were quick to reverse our investments in the wireless cable area earlier this
year.
Recently, we kept cash handy for a variety of purposes. Because the yield
spread between short- and long-term Treasuries was relatively small, we opted to
place some of our reserves in cash to help minimize price fluctuations and to
increase our flexibility to respond to investment opportunities. During the
latter half of the year, we made good money in convertible bonds. These
securities are also closely related to the equity market since convertible bonds
can be exchanged for the underlying stock. The bonds' yields cushion the
convertibles' potential downside risk, allowing a bond holder to participate in
a rapidly growing company's stock price. We were selective in this area, and
scored good gains in the media and entertainment industry.
Going Forward
As October ended, the growing turmoil in Southeast Asia sparked a global
flight to quality. Global investors view the U.S. Treasury market as an
international "safe haven," and the influx of capital helped drive yields lower.
It also helped demonstrate that global financial markets are becoming
increasingly integrated and that capital can move freely around the world.
Looking toward 1998, we will continue to monitor interest rates closely,
and the recent volatility reconfirmed our faith in a diversified strategy. We
intend to capitalize on areas where we find good relative values, seeking steady
income and limiting downside risk. Intensive credit research is the key to
locating good investment opportunities, especially in the high-yield market, and
we will stick to our disciplined approach going forward.
Thank you for your continued investment in Janus Flexible Income Fund.
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Past performance does not guarantee future results.
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 2
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JANUS FLEXIBLE INCOME FUND
Portfolio Managers, Sandy R. Rufenacht, Ronald V. Speaker
Performance Overview
GRAPHIC
A graphic comparison of the change in value of a hypothetical $10,000 investment
in Janus Flexible Income Fund and the Lehman Brothers Government/Corporate Bond
Index. Janus Flexible Income Fund is represented by a solid green line. The
Lehman Brothers Government/Corporate Bond Index is represented by a single
dashed black line. The "y" axis reflects the value of the investment. The "x"
axis reflects the computation periods from inception, July 2, 1987, through
October 31, 1997. The upper right quadrant reflects the ending value of the
hypothetical investment in Janus Flexible Income Fund ($25,514) as compared to
the Lehman Brothers Government/Corporate Bond Index ($24,262). There is a legend
in the upper left quadrant of the graph which indicates Janus Flexible Income
Fund's one-year, five-year, ten-year and since inception (July 2, 1987) average
annual total returns as 11.48%, 10.21%, 9.99% and 9.47%, respectively.
* The Fund's inception date
Source - Lipper Analytical Services, Inc. 1997.
All returns reflect reinvested dividends.
Past performance does not guarantee future results. Investment return and
principal value may fluctuate so that shares, when redeemed, may be worth more
or less than their original cost. The Fund's portfolio may differ significantly
from the securities in the Index. The Index is unmanaged and therefore does not
reflect the cost of portfolio management or trading.
JANUS FLEXIBLE INCOME FUND October 31, 1997
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Principal Amount Market Value
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Corporate Bonds - 71.9%
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Automotive - Cars and Light Trucks - 2.9%
$20,000,000 Ford Motor Co., 7.25%
notes, due 10/1/08 $21,150,000
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Automotive - Medium and Heavy Duty Trucks - 0.4%
2,500,000 Western Star Truck Holdings, Ltd., 8.75%
senior notes, due 5/1/07+ 2,584,375
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Beverages - Non-Alcoholic - 1.6%
7,500,000 Coca-Cola Enterprises, 6.75%
debentures, due 9/15/23 7,275,000
4,000,000 Dr. Pepper Bottling Holdings, zero coupon
senior notes, due 2/15/03 3,990,000
11,265,000
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Broadcast Services and Programming - 1.4%
5,000,000 Fox Kids Worldwide, Inc., 9.25%
senior notes, due 11/1/07+ 4,837,500
5,000,000 Fox/Liberty Networks LLC, 8.875%
senior notes, due 8/15/07+ 5,000,000
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9,837,500
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Building - Residential and Commercial - 0.2%
1,500,000 Toll Corp., 7.75%
company guaranteed notes, due 9/15/07 1,477,500
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Cable Television - 0.5%
3,000,000 Galaxy Telecom, L.P., 12.375%
senior subordinated notes, due 10/1/05 3,262,500
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Casino Services - 0.8%
6,000,000 Isle of Capri Black Hawk L.L.C., 13.00%
first mortgage bonds, due 8/31/04+ 6,075,000
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Cellular Telecommunications - 2.4%
$ 3,000,000 Iridium L.L.C./Capital Corp., 11.25%
senior notes, due 7/15/05 $ 2,793,750
Nextel Communications, Inc.:
15,000,000 zero coupon, senior discount notes, due 9/1/03 14,662,500
280,000 zero coupon, senior discount notes, due 8/15/04 238,000
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17,694,250
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Chemicals - Specialty - 1.4%
10,000,000 Praxair, Inc., 6.90%
notes, due 11/1/06 10,300,000
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Commercial Banks - 3.9%
10,100,000 First Nationwide Escrow Corp., 10.625%
senior subordinated notes, due 10/1/03 11,059,500
2,000,000 First Nationwide Holdings, Inc., 12.50%
senior notes, due 4/15/03 2,260,000
5,000,000 HUBCO, Inc., 8.20%
subordinated debentures, due 9/15/06 5,375,000
5,000,000 Mercantile Bank Corp., 7.30%
subordinated notes, due 6/15/07 5,212,500
4,000,000 North Fork Bancorporation, Inc., 8.70%
company guaranteed notes, due 12/15/26 4,250,000
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28,157,000
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Commercial Services - 1.7%
7,000,000 NeoData Services, Inc., 12.00%
senior notes, due 5/1/03 7,638,750
5,000,000 Pantry, Inc., 10.25%
senior subordinated notes, due 10/15/07 4,987,500
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12,626,250
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Computers - Mainframe - 1.3%
9,000,000 IBM Corp., 7.00%
debentures, due 10/30/25 9,090,000
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See Notes to Schedules of Investments
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 3
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JANUS FLEXIBLE INCOME FUND October 31, 1997
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Principal Amount Market Value
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Containers - Metal and Glass - 2.1%
$10,000,000 Crown Cork & Seal Finance PLC, 7.00%
company guaranteed notes, due 12/15/06 $10,287,500
5,000,000 Owens-Illinois, Inc., 7.85%
senior notes, due 5/15/04 5,200,000
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15,487,500
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Electric - Integrated - 1.8%
El Paso Electric Co.:
3,000,000 8.90%, first mortgage bonds, due 2/1/06 3,266,250
9,000,000 9.40%, first mortgage bonds, due 5/1/11 10,001,250
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13,267,500
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Engineering - Research and Development - 0.9%
6,000,000 Intertek Finance PLC, 10.25%
senior subordinated notes, due 11/1/06 6,300,000
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Finance - Auto Loans - 1.4%
10,000,000 General Motors Acceptance Corp., 6.625%
notes, due 10/15/05 10,075,000
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Finance - Leasing Companies - 0.7%
5,000,000 Ryder Trucks, Inc., 10.00%
senior subordinated notes, due 12/1/06 4,987,500
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Food - Diversified - 1.9%
5,000,000 International Home Foods, Inc., 10.375%
senior subordinated notes, due 11/1/06 5,375,000
8,000,000 Ralston Purina Co., 7.75%
debentures, due 10/1/15 8,610,000
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13,985,000
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Food - Retail - 2.1%
2,000,000 Carr-Gottstein Foods Co., 12.00%
senior subordinated notes, due 11/15/05 2,212,500
2,000,000 Pathmark Stores, Inc., 12.625%
subordinated notes, due 6/15/02 2,025,000
7,000,000 Ralphs Grocery Co., 11.00%
senior subordinated notes, due 6/15/05 7,682,500
3,000,000 Star Markets Co., Inc., 13.00%
senior subordinated notes, due 11/1/04 3,412,500
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15,332,500
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Funeral Services and Related Items - 0.7%
4,500,000 Service Corporation International, 7.70%
notes, due 4/15/09 4,882,500
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Gambling - Non-Hotel Casinos - 1.1%
4,000,000 Casino America, Inc., 12.50%
senior notes, due 8/1/03 4,270,000
3,000,000 Mohegan Tribal Gaming Authority, 13.50%
senior notes, due 11/15/02 3,911,250
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8,181,250
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Home Furnishings - 0.6%
212,000 Cort Furniture Rental, 12.00%
senior notes, due 9/1/00 233,200
4,000,000 Lifestyle Furnishings International, Inc., 10.875%
company guaranteed notes, due 8/1/06 4,460,000
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4,693,200
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Hotels and Motels - 1.5%
10,000,000 Courtyard By Marriott ll, L.P., 10.75%
senior notes, due 2/1/08 10,887,500
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Industrial Audio and Video Products - 0.3%
2,000,000 Unifrax Investment Corp., 10.50%
senior notes, due 11/1/03 2,070,000
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Investment Companies - 0.3%
$ 3,000,000 CEI Citicorp Holdings, 11.25%
bonds, due 2/14/07+ $ 2,392,500
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Life and Health Insurance - 2.8%
11,000,000 Delphi Financial Group, Inc., 8.00%
senior notes, due 10/1/03 11,343,750
5,000,000 Life Re Capital Trust I, 8.72%
company guaranteed notes, due 6/15/27+ 5,312,500
3,500,000 Penncorp Financial Group, Inc., 9.25%
senior subordinated notes, due 12/15/03 3,648,750
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20,305,000
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Machinery - Farm - 0.6%
4,000,000 AGCO Corp., 8.50%
senior subordinated notes, due 3/15/06 4,190,000
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Manufacturing - 0.4%
3,000,000 Plastic Specialties & Technologies, Inc., 11.25%
senior secured notes, due 12/1/03 3,247,500
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Medical - Drugs - 0.8%
5,250,000 ICN Pharmaceuticals, Inc., 9.25%
senior notes, due 8/15/05 5,512,500
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Medical - Hospitals - 1.8%
12,000,000 Tenet Healthcare Corp., 10.125%
senior subordinated notes, due 3/1/05 13,170,000
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Medical Products - 1.7%
2,500,000 ALARIS Medical Inc., 9.75%
company guaranteed notes, due 12/1/06+ 2,612,500
8,500,000 Dade International, Inc., 11.125%
senior subordinated notes, Series B,
due 5/1/06 9,456,250
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12,068,750
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Money Center Banks - 2.8%
10,000,000 Chase Manhattan Corp., 6.75%
subordinated notes, due 8/15/08 10,050,000
10,000,000 First National Bank of Boston, 7.375%
subordinated notes, due 9/15/06 10,550,000
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20,600,000
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Multimedia - 3.7%
15,000,000 Time Warner, Inc., 8.18%
notes, due 8/15/07 16,350,000
10,000,000 Walt Disney Co. (The), 6.75%
senior notes, due 3/30/06 10,187,500
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26,537,500
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Oil Companies - Exploration and Production - 1.8%
5,000,000 Magnum Hunter Resources, Inc., 10.00%
senior notes, due 6/1/07 5,062,500
Mesa Operating Co.:
3,000,000 10.625%, unsecured company guaranteed
notes, due 7/1/06 3,450,000
3,000,000 zero coupon, company guaranteed
notes, due 7/1/06 2,407,500
2,000,000 Mitchell Energy & Development Corp., 6.75%
senior notes, due 2/15/04 1,995,000
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12,915,000
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Paint and Related Products - 1.5%
10,500,000 Sherwin-Williams Co., 6.85%
notes, due 2/1/07 10,880,625
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See Notes to Schedules of Investments
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 4
<PAGE>
JANUS FLEXIBLE INCOME FUND October 31, 1997
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Shares or
Principal Amount Market Value
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Property and Casualty Insurance - 3.0%
$5,000,000 Arkwright CSN Trust, 9.625%
notes, due 8/15/26+ $ 5,893,750
6,000,000 First American Capital Trust, 8.50%
company guaranteed notes, due 4/15/12+ 6,577,500
9,000,000 Orion Capital Corp., 7.25%
senior notes, due 7/15/05 9,303,750
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21,775,000
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Recreational Centers - 0.4%
3,000,000 Bally Total Fitness Holding Corp., 9.875%
senior subordinated notes, due 10/15/07 2,970,000
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Reinsurance - 0.8%
5,750,000 Veritas Holdings GMBH, 9.625%
senior notes, due 12/15/03+ 6,138,125
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Retail - Drug Store - 0.4%
3,000,000 Duane Reade Corp., 12.00%
senior notes, due 9/15/02 3,120,000
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Retail - Jewelry - 0.3%
2,000,000 Zale Corp., 8.50%
senior notes, due 10/1/07 1,975,000
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Retail - Leisure Products - 1.4%
9,000,000 Selmer Co., Inc., 11.00%
senior subordinated notes, due 5/15/05 9,922,500
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Retail - Pet Food and Supplies - 0.4%
3,000,000 Doane Products Co., 10.625%
senior notes, due 3/1/06 3,202,500
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Satellite Telecommunications - 0.3%
2,085,000 Digital Television Services, L.L.C., 12.50%
company guaranteed notes, due 8/1/07 2,241,375
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Savings/Loan/Thrifts - 3.4%
6,000,000 Anchor Bancorp, Inc., 8.9375%
senior notes, due 7/9/03 6,247,500
8,000,000 People's Bank Bridgeport, 7.20%
subordinated notes, due 12/1/06 8,150,000
5,000,000 St. Paul Bancorp, Inc., 7.125%
senior notes, due 2/15/04 5,081,250
5,000,000 Standard Federal Bancorp, 7.75%
subordinated notes, due 7/17/06 5,356,250
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24,835,000
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Steel - Producers - 0.6%
4,000,000 Ivaco, Inc., 11.50%
senior notes, due 9/15/05 4,400,000
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Super-Regional Banks - 2.6%
8,000,000 NationsBank Corp., 7.75%
subordinated notes, due 8/15/15 8,580,000
10,000,000 Wells Fargo & Co., 7.125%
subordinated notes, due 8/15/06 10,300,000
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18,880,000
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Telecommunication Services - 0.5%
3,000,000 Talton Holdings, Inc., 11.00%
company guaranteed notes, due 6/30/07 3,180,000
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Telephone - Integrated - 0.5%
3,000,000 Intermedia Communications of Florida, Inc.,
13.50% senior notes, due 6/1/05 3,607,500
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Telephone - Local - 0.5%
3,450,000 MetroNet Communications, 12.00%
units, due 8/15/07 3,889,875
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Telephone - Long Distance - 2.0%
$14,000,000 Worldcom, Inc., 7.75%
notes, due 4/1/07 $ 14,840,000
- --------------------------------------------------------------------------------
Television - 1.4%
3,500,000 Allbritton Communications, 11.50%
senior subordinated debentures,
due 8/15/04 3,670,625
5,500,000 Pegasus Media & Communications, Inc., 12.50%
notes, due 7/1/05 6,228,750
- --------------------------------------------------------------------------------
9,899,375
- --------------------------------------------------------------------------------
Textile - Products - 0.3%
2,000,000 Collins & Aikman Corp., 10.00%
senior subordinated notes, due 1/15/07 2,095,000
- --------------------------------------------------------------------------------
Transportation - Railroad - 0.1%
1,000,000 MRS Logistica S.A., 10.625%
bonds, due 8/15/05+ 955,000
- --------------------------------------------------------------------------------
Transportation - Services - 0.5%
2,000,000 Atlantic Express Inc., 10.75%
company guaranteed notes, due 2/1/04 2,100,000
1,500,000 CSX Corp., 7.25%
debentures, due 5/1/04+ 1,563,750
- --------------------------------------------------------------------------------
3,663,750
- --------------------------------------------------------------------------------
Wire and Cable Products - 0.7%
5,000,000 Anixter International, Inc., 8.00%
company guaranteed notes, due 9/15/03 5,262,500
- --------------------------------------------------------------------------------
Total Corporate Bonds (cost $501,108,503) 522,340,700
- --------------------------------------------------------------------------------
Foreign Bonds - 1.2%
DEM 15,040,000 ITT Promedia, 9.125%
senior subordinated notes, due 9/15/07 8,869,409
(cost $8,486,866)
- --------------------------------------------------------------------------------
Preferred Stock - 2.1%
- --------------------------------------------------------------------------------
Insurance Brokers - 0.6%
4,500 SIG Capital Trust I, 9.50%+ 4,500,000
- --------------------------------------------------------------------------------
Savings/Loan/Thrifts - 1.5%
350,000 Chevy Chase Savings, 13.00% 10,762,500
- --------------------------------------------------------------------------------
Total Preferred Stock (cost $15,393,750) 15,262,500
- --------------------------------------------------------------------------------
U.S. Government Obligations - 14.9%
U.S. Treasury Notes:
$98,500,000 6.625%, due 5/15/07 103,510,695
5,000,000 6.125%, due 8/15/07 5,108,800
- --------------------------------------------------------------------------------
Total U.S. Government Obligations (cost $106,441,100) 108,619,495
- --------------------------------------------------------------------------------
Short-Term Corporate Notes - 5.4%
Household Finance Co.
30,000,000 5.68%, 11/3/97 29,990,533
Prudential Funding Corp.
9,200,000 5.67%, 11/3/97 9,197,102
- --------------------------------------------------------------------------------
Total Short-Term Corporate Notes (amortized cost $39,187,635) 39,187,635
- --------------------------------------------------------------------------------
Warrants - 0%
100,000 Nextlink Communications, Inc.,
exp. 2/1/09* (cost $0) 1,000
- --------------------------------------------------------------------------------
Total Investments (total cost $670,617,854) - 95.5% 694,280,739
- --------------------------------------------------------------------------------
Cash, Receivables and Other Assets, net of Liabilities - 4.5% 32,820,601
- --------------------------------------------------------------------------------
Net Assets - 100% $727,101,340
- --------------------------------------------------------------------------------
See Notes to Schedules of Investments
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 5
<PAGE>
JANUS HIGH-YIELD FUND Portfolio Managers, Sandy R. Rufenacht, Ronald V. Speaker
Performance
Janus High-Yield Fund returned 16.94% for the 12-month period ended October
31, 1997, versus a return of 13.72% for the Lehman Brothers High-Yield Bond
Index. Both returns include reinvested dividends.
For the 12 months ended October 31, 1997, Janus High-Yield Fund ranked 21
out of 173 High Current Yield Funds (top 13%) tracked by Lipper Analytical
Services, Inc., a large mutual fund rating company.(1)
The Year In Review
The past 12 months were a very interesting time for high-yield bonds.
Several themes converged to help this segment post solid returns. Healthy
economic growth has been an important catalyst, helping earnings expand and
allowing companies to pay down existing debt. Additionally, as interest rates
trend lower, companies are looking to refinance debt to reduce interest payments
and improve balance sheets.
Many companies are also looking to the high-yield market as an efficient
means of financing, securing money for capital improvements or as an avenue to
help make selected acquisitions. We are on pace for a record amount of new
issuance during calendar 1997. To date, the value of new bonds exceeds $108
billion.
High-yield bonds also correlate with equities, and the surge in stock
prices has led junk bonds higher. Coupled with the decline in Treasury yields
and the growing acceptance of high-yield quality debt as a meaningful
investment, high-yield bonds have been able to post excellent returns.
- --------------------------------------------------------------------------------
Fund Profile October 31, 1997 October 31, 1996
Weighted Avg. Maturity 7.2 Yrs. 8.1 Yrs.
Average Modified Duration* 4.8 Yrs. 5.1 Yrs.
30-Day Avg. Yield** 7.87% 9.06%
30-Day Avg. Yield
Without Reimbursement** 7.87% 8.69%
Average Rating B B+
- --------------------------------------------------------------------------------
*A theoretical measure of price volatility.
**Yields will fluctuate.
Portfolio Strategy
Stringent fundamental analysis is critical in evaluating high-yield debt.
We subject all of our holdings to intense scrutiny to determine each issue's
underlying potential. As a result, we travel quite often, attending conferences
and meeting with the management teams of our holdings. This gives us a
substantive edge and helps us make sound investment decisions. We found
compelling ideas in very diverse industries, including telecommunications,
supermarkets, media, broadcasting, and radio.
Following the Telecommunications Act of 1996, rapid deregulation has swept
across the industry and has created numerous opportunities. As the competitive
landscape changes, local exchange carriers are now competing with the large,
established regional Bell operating companies. This gives consumers
alternatives, with better service at lower prices. One issuer that performed
extremely well was Nextel, a fully integrated wireless communication company.
The company is heavily sponsored by Craig McCaw, who is a visionary for the
industry. Among our other positions, Teleport, Metronet, and Verio also
performed well.
Media companies, which include broadcasting, radio, and outdoor
advertising, also performed well. A wave of consolida-tion accelerated after new
FCC rules made changes in ownership possible. As consolidation continues,
companies are finding distribution efficiencies and numerous cost-cutting
opportunities. Allbritton, Sinclair, and Radio One all posted good results and
helped Fund performance.
Supermarkets were another good area. We own extremely well-run companies,
and there is a growing trend toward consolidation in this industry, too. Ralph's
Grocery and Star Markets both posted good results. Ralph's recently traded well
in anticipation of further industry consolidation.
Going Forward
We expect to see good relative performance as long as the underpinnings of
strong economic growth remain intact. Although the recent volatility in
Southeast Asia has tempered the world economy somewhat, domestic growth
continues at a good clip. Also, with a major decline in long-term interest
rates, the coupons on high-yield debt become increasingly attractive to those
searching for yield. But it is important to remember that junk bonds correlate
very closely with the equity markets and, therefore, they are not immune to the
volatility surrounding stocks.
Research remains the key to properly assessing credit risk, and the
high-yield market presents many opportunities that are ripe for Janus' research
to add value. Companies with rapidly accelerating earnings and good management
teams should eventually improve balance sheets and reduce risk. Overall,
disciplined, hands-on analysis is vital to portfolio construction, and remains
our focus going forward.
Thank you for your continued investment in Janus High-Yield Fund.
- --------------------------------------------------------------------------------
(1) A High Current Yield Fund is defined by Lipper as "a fund that aims at high
(relative) current yield from fixed income securities, has no quality or
maturity restrictions, and tends to invest in lower grade debt issues."
Lipper's ranking is based on total return, including reinvestment of
dividends and capital gains for the stated period. Past performance does
not guarantee future results.
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 6
<PAGE>
JANUS HIGH-YIELD FUND Portfolio Managers, Sandy R. Rufenacht, Ronald V. Speaker
Performance Overview
GRAPHIC
A graphic comparison of the change in value of a hypothetical $10,000 investment
in Janus High-Yield Fund and the Lehman Brothers High-Yield Bond Index. Janus
High-Yield Fund is represented by a solid green line. The Lehman Brothers
High-Yield Bond Index is represented by a single dashed black line. The "y" axis
reflects the value of the investment. The "x" axis reflects the computation
periods from inception, December 29, 1995, through October 31, 1997. The upper
right quadrant reflects the ending value of the hypothetical investment in Janus
High-Yield Fund ($13,982) as compared to the Lehman Brothers High-Yield Bond
Index ($12,329). There is a legend in the upper left quadrant of the graph which
indicates Janus High-Yield Fund's one-year and since inception (December 29,
1995) average annual total returns as 16.94% and 20.12%, respectively.
* The Fund's inception date
Source - Lipper Analytical Services, Inc. 1997.
All returns reflect reinvested dividends.
Past performance does not guarantee future results. Investment return and
principal value may fluctuate so that shares, when redeemed, may be worth more
or less than their original cost. The Fund's portfolio may differ significantly
from the securities in the Index. The Index is unmanaged and therefore does not
reflect the cost of portfolio management or trading.
JANUS HIGH-YIELD FUND October 31, 1997
- --------------------------------------------------------------------------------
Principal Amount Market Value
- --------------------------------------------------------------------------------
Corporate Bonds - 85.7%
- --------------------------------------------------------------------------------
Building and Construction - 1.0%
$ 3,000,000 Reliant Building Products, 10.875%
senior subordinated notes, due 5/1/04 $ 3,120,000
- --------------------------------------------------------------------------------
Cable Television - 3.2%
4,000,000 Galaxy Telecom, L.P., 12.375%
senior subordinated notes, due 10/1/05 4,350,000
2,000,000 Optel, Inc., 13.00%
senior notes, due 2/15/05 2,040,000
3,000,000 Rifkin Acquisition Partners, L.P., 11.125%
senior subordinated notes, due 1/15/06 3,247,500
- --------------------------------------------------------------------------------
9,637,500
- --------------------------------------------------------------------------------
Casino Hotels - 3.0%
3,000,000 Hollywood Casino Corp., 12.75%
senior notes, due 11/1/03 3,270,000
2,000,000 PRT Funding Corp., 11.625%,
senior notes, due 4/15/04 1,672,500
4,000,000 Riviera Holdings Corp., 10.00%
first mortgage notes, due 8/15/04 3,990,000
- --------------------------------------------------------------------------------
8,932,500
- --------------------------------------------------------------------------------
Casino Services - 1.7%
5,000,000 Isle of Capri Black Hawk, L.L.C.,
13.00% first mortgage
bonds, due 8/31/04+ 5,062,500
- --------------------------------------------------------------------------------
Cellular Telecommunications - 9.5%
5,000,000 Dial Call Communications, zero coupon
senior discount notes, due 4/15/04 4,706,250
7,000,000 Iridium, L.L.C./Capital Corp., 11.25%
senior notes, due 7/15/05 6,518,750
14,000,000 Nextel Communications, Inc., zero coupon
senior discount notes, due 8/15/04 11,900,000
- --------------------------------------------------------------------------------
Cellular Telecommunications - (continued)
$3,000,000 PriCellular Wireless Corp., 10.75%
senior notes, due 11/1/04 $ 3,217,500
4,500,000 Telesystem International Wireless, Inc.,
zero coupon, senior discount notes,
due 11/1/07 2,435,625
- --------------------------------------------------------------------------------
28,778,125
- --------------------------------------------------------------------------------
Commercial Banks - 1.5%
2,000,000 First Nationwide Escrow Corp., 10.625%
senior subordinated notes, due 10/1/03 2,190,000
2,000,000 First Nationwide Holdings, Inc., 12.50%
senior notes, due 4/15/03 2,260,000
- --------------------------------------------------------------------------------
4,450,000
- --------------------------------------------------------------------------------
Commercial Services - 1.6%
2,000,000 NeoData Services, Inc., 12.00%
senior notes, due 5/1/03 2,182,500
2,500,000 Pantry, Inc., 10.25%
senior subordinated notes, due 10/15/07 2,493,750
- --------------------------------------------------------------------------------
4,676,250
- --------------------------------------------------------------------------------
Cosmetics and Toiletries - 0.7%
2,000,000 French Fragrance, 10.375%
senior notes, due 5/15/07 2,085,000
- --------------------------------------------------------------------------------
Diversified Operations - 1.0%
3,000,000 High Voltage Engineering Corp., 10.50%
senior notes, due 8/15/04 3,112,500
- --------------------------------------------------------------------------------
Finance - Leasing Companies - 1.3%
4,000,000 Ryder Trucks, Inc., 10.00%
senior subordinated notes, due 12/1/06 3,990,000
- --------------------------------------------------------------------------------
See Notes to Schedules of Investments
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 7
<PAGE>
JANUS HIGH-YIELD FUND October 31, 1997
- --------------------------------------------------------------------------------
Principal Amount Market Value
- --------------------------------------------------------------------------------
Food - Retail - 4.7%
$4,000,000 Pathmark Stores, Inc., 12.625%
subordinated notes, due 6/15/02 $ 4,050,000
5,000,000 Ralphs Grocery Co., 11.00%
senior subordinated notes, due 6/15/05 5,487,500
4,000,000 Star Markets Co., Inc., 13.00%
senior subordinated notes, due 11/1/04 4,550,000
- --------------------------------------------------------------------------------
14,087,500
- --------------------------------------------------------------------------------
Funeral Services and Related Items - 0.9%
2,500,000 Prime Succession Acquisition Co., 10.75%
senior subordinated notes, due 8/15/04 2,756,250
- --------------------------------------------------------------------------------
Gambling - Non Hotel Casinos - 2.5%
5,000,000 Casino America, Inc., 12.50%
senior notes, due 8/1/03 5,337,500
2,000,000 Majestic Star Casino, L.L.C., 12.75%
senior notes, due 5/15/03 2,170,000
- --------------------------------------------------------------------------------
7,507,500
- --------------------------------------------------------------------------------
Gas - Transportation - 1.1%
3,000,000 Navigator Gas Transportation, 12.00%
units, due 6/30/97+ 3,322,500
- --------------------------------------------------------------------------------
Home Furnishings - 1.0%
2,700,000 Cort Furniture Rental, 12.00%
senior notes, due 9/1/00 2,970,000
- --------------------------------------------------------------------------------
Industrial Audio and Video Products - 1.0%
3,000,000 Unifrax Investment Corp., 10.50%
senior notes, due 11/1/03 3,105,000
- --------------------------------------------------------------------------------
Machine Tools and Related Products - 0.7%
2,000,000 International Knife & Saw, Inc., 11.375%
senior subordinated notes, due 11/15/06 2,150,000
- --------------------------------------------------------------------------------
Manufacturing - 0.7%
2,000,000 Plastic Specialties & Technologies, Inc., 11.25%
senior secured notes, due 12/1/03 2,165,000
- --------------------------------------------------------------------------------
Motion Pictures and Services - 1.8%
5,000,000 All American Communications, Inc., 10.875%
senior subordinated notes, due 10/15/01 5,537,500
- --------------------------------------------------------------------------------
Oil and Gas Drilling - 2.0%
6,000,000 Southwest Royalties, Inc., 10.50%
due 10/15/04 5,940,000
- --------------------------------------------------------------------------------
Oil Companies - Exploration and Production - 4.8%
5,000,000 Gothic Energy Corp., 12.25%
units, due 9/1/04 5,350,000
2,500,000 Magnum Hunter Resources, Inc., 10.00%
senior notes, due 6/1/07 2,531,250
Mesa Operating Co.:
3,000,000 10.625%, unsecured company
guaranteed notes, due 7/1/06 3,450,000
4,000,000 zero coupon, company guaranteed
notes, due 7/1/06 3,210,000
- --------------------------------------------------------------------------------
14,541,250
- --------------------------------------------------------------------------------
Recreational Centers - 2.5%
4,500,000 Bally Total Fitness Holding Corp., 9.875%
senior subordinated notes, due 10/15/07 4,455,000
3,000,000 Cobblestone Golf Group, Inc., 11.50%
senior notes, due 6/1/03 3,225,000
- --------------------------------------------------------------------------------
7,680,000
- --------------------------------------------------------------------------------
Retail - Diversified - 2.8%
5,000,000 Core-Mark International, Inc., 11.375%
senior subordinated notes, due 9/15/03 5,250,000
3,000,000 Eye Care Centers of America, Inc., 12.00%
senior notes, due 10/1/03 3,255,000
- --------------------------------------------------------------------------------
8,505,000
- --------------------------------------------------------------------------------
Retail - Drug Store - 1.7%
$3,000,000 Community Distributors, Inc. 10.25%
senior notes, due 10/15/04 $ 3,060,000
2,000,000 Duane Reade Corp., 12.00%
senior notes, due 9/15/02 2,080,000
- --------------------------------------------------------------------------------
5,140,000
- --------------------------------------------------------------------------------
Satellite Telecommunications - 1.1%
3,000,000 Digital Television Services, L.L.C., 12.50%
company guaranteed notes, due 8/1/07 3,225,000
- --------------------------------------------------------------------------------
Savings/Loan/Thrifts - 1.0%
3,000,000 Local Financial Corp., 11.00%
senior notes, due 9/8/04+ 3,150,000
- --------------------------------------------------------------------------------
Steel - Producers - 3.3%
2,000,000 Bar Technologies, 13.50%
company guaranteed notes, due 4/1/01 2,172,500
4,000,000 Ivaco, Inc., 11.50%
senior notes, due 9/15/05 4,400,000
3,000,000 Weirton Steel Corp., 11.375%
senior notes, due 7/1/04 3,240,000
- --------------------------------------------------------------------------------
9,812,500
- --------------------------------------------------------------------------------
Telecommunication Equipment - 2.1%
4,000,000 Diamond Cable Communications PLC,
zero coupon, senior
discount notes, due 12/15/05 2,975,000
3,500,000 Telex Communications, Inc., 10.50%
company guaranteed notes, due 5/1/07 3,508,750
- --------------------------------------------------------------------------------
6,483,750
- --------------------------------------------------------------------------------
Telecommunication Services - 15.5%
1,475,000 Hermes Europe Railtel, B.V., 11.50%
senior notes, due 8/15/07+ 1,596,688
5,000,000 HighwayMaster Communications, Inc., 13.75%
units, due 9/15/05+ 4,962,500
Intermedia Communications, Inc.:
4,000,000 zero coupon, senior discount notes,
due 5/15/06 3,060,000
3,000,000 zero coupon, senior discount notes,
due 7/15/07 1,976,250
3,000,000 ITC Deltacom, Inc., 11.00%
senior notes, due 6/1/07 3,262,500
5,000,000 Microcell Telecommunications, Inc., zero coupon
senior discount notes, due 6/1/06 3,306,250
3,000,000 Peoples Telephone Co., Inc., 12.25%
senior notes, due 7/15/02 3,112,500
7,000,000 Qwest Communications International,
zero coupon, senior discount notes,
due 10/15/07+ 4,488,750
3,000,000 RCN Corp., 11.125%
senior discount notes, due 10/15/07 1,743,750
4,000,000 Talton Holdings, Inc., 11.00%
company guaranteed notes, due 6/30/07 4,240,000
Teleport Communications Group, Inc.:
3,000,000 9.875%, senior notes, due 7/1/06 3,288,750
5,000,000 zero coupon, senior discount notes,
due 7/1/07 3,912,500
4,000,000 Teletrac, Inc, 14.00%,
units, due 8/1/07+ 4,050,000
4,000,000 Winstar Communications, zero coupon
senior discount notes, due 10/15/05 3,680,000
- --------------------------------------------------------------------------------
46,680,438
- --------------------------------------------------------------------------------
Telephone - Integrated - 0.7%
2,000,000 MGC Communications, Inc., 13.00%
units, due 10/1/04+ 1,985,000
- --------------------------------------------------------------------------------
See Notes to Schedules of Investments
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 8
<PAGE>
JANUS HIGH-YIELD FUND October 31, 1997
- --------------------------------------------------------------------------------
Shares or
Principal Amount Market Value
- --------------------------------------------------------------------------------
Telephone - Local - 2.2%
$ 2,000,000 MetroNet Communications, 12.00%
units, due 8/15/07 $ 2,255,000
4,555,000 Transtel S.A., 12.50%
senior notes, due 11/1/07+ 4,361,413
- --------------------------------------------------------------------------------
6,616,413
- --------------------------------------------------------------------------------
Telephone - Long Distance - 1.1%
3,000,000 Primus Telecommunications Group, Inc., 11.75%
units, due 8/1/04 3,187,500
- --------------------------------------------------------------------------------
Television - 3.5%
5,000,000 Allbritton Communications, 11.50%
senior subordinated debentures, due 8/15/04 5,243,750
3,000,000 Price Comm Wireless, Inc., 11.75%
senior subordinated notes, due 7/15/07 3,240,000
2,000,000 Radio One, Inc., 7.00%
senior subordinated notes, due 5/15/04 1,927,500
- --------------------------------------------------------------------------------
10,411,250
- --------------------------------------------------------------------------------
Tobacco - 0.7%
2,000,000 Consolidated Cigar Acquisition Corp., 10.50%
senior subordinated notes, due 3/1/03 2,080,000
- --------------------------------------------------------------------------------
Transportation - Services - 0.7%
2,000,000 Atlantic Express, Inc., 10.75%
company guaranteed notes, due 2/1/04 2,100,000
- --------------------------------------------------------------------------------
Wire and Cable Products - 1.1%
3,000,000 International Wire Group, 11.75%
senior subordinated notes, due 6/1/05 3,270,000
- --------------------------------------------------------------------------------
Total Corporate Bonds (cost $253,062,950) 258,253,726
- --------------------------------------------------------------------------------
Foreign Bonds - 3.1%
DEM 10,000,000 ITT Promedia, 9.125%
senior subordinated notes, due 9/15/07 5,897,213
CAD 8,500,000 Microcell Telecommunications, Inc., zero coupon
senior discount notes, due 10/15/07 3,378,359
- --------------------------------------------------------------------------------
Total Foreign Bonds (cost $9,250,529) 9,275,572
- --------------------------------------------------------------------------------
Common Stock - 0.3%
- --------------------------------------------------------------------------------
Cable Television - 0%
4,000 Optel, Inc. 40
- --------------------------------------------------------------------------------
Casino Hotels - 0.3%
48,850 Rio Hotel & Casino, Inc. 1,071,647
- --------------------------------------------------------------------------------
Total Common Stock (cost $949,967) 1,071,687
- --------------------------------------------------------------------------------
Preferred Stock - 3.1%
- --------------------------------------------------------------------------------
Cable Television - 0.7%
15,000 TCI Pacific Communications, 5.00% 2,090,625
- --------------------------------------------------------------------------------
Multimedia - 1.4%
77,250 Houston Industries, Inc., 7.00% 4,229,437
- --------------------------------------------------------------------------------
Radio - 0.7%
2,125 Paxson Communications, 12.50% 2,279,062
- --------------------------------------------------------------------------------
Savings/Loan/Thrifts - 0.3%
25,000 Chevy Chase Savings, 13.00% 768,750
- --------------------------------------------------------------------------------
Telephone - Integrated - 0%
113 Intermedia Communications, Inc., 13.50% 133,340
- --------------------------------------------------------------------------------
Total Preferred Stock (cost $8,883,664) 9,501,214
- --------------------------------------------------------------------------------
Warrants - 0.2%
20,000 Microcell Telecommunications, Inc.
Contingent, exp. 12/31/97*,+ $ 12,500
20,000 Microcell Telecommunications, Inc.
Initial, exp. 12/31/97*,+ 470,000
3,000 Primus Telecommunications Group, Inc.,
exp. 8/1/01* 30,000
- --------------------------------------------------------------------------------
Total Warrants (cost $262,500) 512,500
- --------------------------------------------------------------------------------
Total Investments (total cost $272,409,610) - 92.4% 278,614,699
- --------------------------------------------------------------------------------
Cash, Receivables and Other Assets, net of Liabilities - 7.6% 22,807,264
- --------------------------------------------------------------------------------
Net Assets - 100% $301,421,963
- --------------------------------------------------------------------------------
See Notes to Schedules of Investments
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 9
<PAGE>
JANUS FEDERAL TAX-EXEMPT FUND Portfolio Manager, Darrell W. Watters
Performance Review
Janus Federal Tax-Exempt Fund gained 7.72% during fiscal 1997, which ended
on October 31, compared to a gain of 8.49% for the Lehman Brothers Municipal
Bond Index. Both returns include reinvested dividends.
The Fund was positioned a little too cautiously during the last six months
of the year, when midyear economic growth proved very strong and interest rates
were rising. Still, the Fund accomplished two strategic objectives this year:
the yield remained very competitive with Treasuries while the Fund's net asset
value (NAV) was far more stable.
On October 31, 1997, the Fund carried a tax-adjusted yield of 6.56%,
assuming a 31% federal tax bracket, versus a 6.15% yield on the benchmark
30-year Treasury. For investors in the 39.9% federal tax bracket, the yield was
7.54%. Looking at relative volatility, the Fund's NAV varied only 5% during the
year, while the price of the 30-year Treasury bond varied 26%.
The municipal bond market experienced a number of dramatic fluctuations in
fiscal 1997, as interest rates moved quickly in response to signs of strength or
weakness in the U.S. economy. But at year-end, interest rates were near their
yearly lows, due in large part to benign inflation and weakness in the Southeast
Asian economies. Municipal issuers took advantage of low rates to refinance old
higher-yielding debt or sell new bonds. The increase in supply held back
municipal bonds from participating fully in the year-end bond rally. New supply
will probably dry up at calendar year-end, as municipalities close their books.
Another way to gauge the effect of so many municipals coming to market is
to look at the difference (or spread) between municipal and Treasury yields.
Municipal yields ended the period at roughly 87% of equivalent Treasury yields.
(The Fund's portfolio stood at about 89% of equivalent Treasuries.) Normally,
municipal yields are about 82% of the Treasury market, and I expect yields to
settle back and municipal bond prices to rise once the new supply slows down.
To keep the Fund's yield competitive and lower its volatility this year, I
built a significant position in higher-yielding Colorado bonds. In general, a
higher yield tends to dampen a bond's price fluctuations. Our Colorado bonds
were issued by municipalities and districts we know well here at Janus. Often we
have been on-site and looked at the collateral firsthand. Like municipalities
across the country, Colorado towns and tax districts are benefiting from a
healthy economy and experiencing an improvement in credit quality, so I expect
these bonds to perform well, especially if rates continue to move lower.
- --------------------------------------------------------------------------------
Fund Data October 31, 1997 October 31, 1996
Weighted Avg. Maturity 17.1 Yrs. 17.0 Yrs.
Average Modified Duration* 10.3 Yrs. 7.5 Yrs.
30-Day Avg. Yield** 4.79% 5.27%
30-Day Avg. Yield
Without Reimbursement** 4.36% 5.10%
Average Rating AA2 AA3
- --------------------------------------------------------------------------------
*A theoretical measure of price volatility.
**Yields will fluctuate.
- --------------------------------------------------------------------------------
Portfolio Asset Mix October 31, 1997 October 31, 1996
General Obligation Bonds 30.0% 37.0%
Essential Service Revenue Bonds 70.0% 63.0%
- --------------------------------------------------------------------------------
Looking Ahead
I believe the outlook for bonds is positive, especially if economic growth
continues to be moderate. Inflation has virtually disappeared, and the Federal
Reserve Board does not seem inclined to raise short-term interest rates in light
of the severe economic downturn in the Far East and the turbulence in global
equities markets. However, as I have said before, my job is not to forecast the
Federal Reserve's next move, but instead to manage the interest rate risk that
is a natural consequence of the Central Bank's activity. My primary focus is to
maintain a competitive yield and preserve shareholders' capital via a relatively
stable net asset value.
Thank you for your continued investment in Janus Federal Tax-Exempt Fund.
- --------------------------------------------------------------------------------
Past performance does not guarantee future results.
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 10
<PAGE>
JANUS FEDERAL TAX-EXEMPT FUND Portfolio Manager, Darrell W. Watters
Performance Overview
GRAPHIC
A graphic comparison of the change in value of a hypothetical $10,000 investment
in Janus Federal Tax-Exempt Fund and the Lehman Brothers Municipal Bond Index.
Janus Federal Tax-Exempt Fund is represented by a solid green line. The Lehman
Brothers Municipal Bond Index is represented by a single dashed black line. The
"y" axis reflects the value of the investment. The "x" axis reflects the
computation periods from inception, May 3, 1993, through October 31, 1997. The
upper right quadrant reflects the ending value of the hypothetical investment in
Janus Federal Tax-Exempt Fund ($12,755) as compared to the Lehman Brothers
Municipal Bond Index ($13,339). There is a legend in the upper left quadrant of
the graph which indicates Janus Federal Tax-Exempt Fund's one-year and since
inception (May 3, 1993) average annual total returns as 7.72% and 5.56%,
respectively.
* The Fund's inception date
Source - Lipper Analytical Services, Inc. 1997.
All returns reflect reinvested dividends.
Past performance does not guarantee future results. Investment return and
principal value may fluctuate so that shares, when redeemed, may be worth more
or less than their original cost. The Fund's portfolio may differ significantly
from the securities in the Index. The Index is unmanaged and therefore does not
reflect the cost of portfolio management or trading.
JANUS FEDERAL TAX-EXEMPT FUND October 31, 1997
- --------------------------------------------------------------------------------
Principal Amount Market Value
- --------------------------------------------------------------------------------
Municipal Securities 94.9%
- --------------------------------------------------------------------------------
California - 12.8%
$1,600,000 California Statewide Communities Development
Authority Apartment Development
Revenue (Whispering Winds Apartments),
Variable Rate, Series D, 3.60%, 12/1/22 $1,600,000
200,000 Los Angeles Regional Airports Improvement
Corporation Lease Revenue, (American
Airlines - Los Angeles International),
Variable Rate, 4.05%, 12/1/24 200,000
1,000,000 Los Angeles United School District,
(FGIC Insured), Series A, 5.00%, 7/1/21 958,750
10,000,000 San Joaquin Hills Transportation Corridor
Agency Toll Road Revenue, (MBIA Insured),
Series A, zero coupon, 1/15/25 2,300,000
2,975,000 San Mateo County Joint Powers Authority
Lease Revenue, (Capital Projects Program),
(MBIA Insured), 5.00%, 7/1/21 2,882,031
- --------------------------------------------------------------------------------
7,940,781
- --------------------------------------------------------------------------------
Colorado - 39.6%
1,080,000 Bachelor Gulch Metropolitan District, 6.80%,
12/1/06 1,129,950
500,000 Black Hawk, 5.70%, 12/1/12 501,250
500,000 Black Hawk Device Tax Revenue, 6.00%, 12/1/11 511,875
1,600,000 Castle Pines Metropolitan District,
(FSA Insured), Series B, 5.00%, 12/1/15 1,558,000
1,000,000 Castle Rock Golf Enterprise Revenue, 6.50%,
12/1/16 1,007,500
Colorado Housing Financial Authority,
(Single Family Program):
1,000,000 7.10%, 5/1/15 1,118,750
1,000,000 Series B-3, 6.80%, 11/1/28 1,117,500
2,250,000 Denver City and County Airport Revenue,
(MBIA Insured), Series E, 5.25%, 11/15/23 2,202,188
- --------------------------------------------------------------------------------
Colorado - (continued)
Denver West Metropolitan District:
$ 265,000 6.15%, 12/1/13 $ 269,969
750,000 6.50%, 12/1/16 786,563
615,000 6.20%, 6/1/17 626,531
3,000,000 E-470 Public Highway Authority Revenue,
(MBIA Insured), Series A, 5.00%, 9/1/26 2,861,250
Eaglebend Affordable Housing Corp. Multi-
family Revenue, (Housing Project), Series A:
1,000,000 6.45%, 7/1/21 1,002,500
1,300,000 7.40%, 7/1/21 1,303,250
1,000,000 Erie Water Enterprise Revenue,
Series B, 6.00% 12/1/17 1,002,500
2,000,000 Fort Collins Pollution Control Revenue,
(Anheuser-Busch Project), 6.00%, 9/1/31 2,085,000
410,000 Hyland Hills Metropolitan Parks and Recreational
District, Special Revenue, Series A,
6.10%, 12/15/09 416,662
1,000,000 Mountain Village Metropolitan District,
(San Miguel County), 8.10%, 12/1/11 1,108,750
175,000 Plains Metropolitan District, 5.85%, 12/1/05 176,768
1,000,000 Sand Creek Metropolitan District, 7.125%,
12/1/16 1,012,500
100,000 Telluride Excise Tax Revenue, 5.75%, 12/1/12 102,500
Telluride Housing Authority Housing Revenue,
(Shandoka Apartments Project):
100,000 7.50%, 6/1/12 108,250
1,500,000 7.50%, 6/1/23 1,633,125
Upper Cherry Creek Metropolitan District:
500,000 6.20%, 12/1/05 523,750
400,000 6.75%, 12/1/11 423,000
- --------------------------------------------------------------------------------
24,589,881
- --------------------------------------------------------------------------------
Florida - 2.3%
1,500,000 Florida State Board of Education Capital Outlay,
Series A, 5.00%, 6/1/27 1,428,750
- --------------------------------------------------------------------------------
See Notes to Schedules of Investments
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 11
<PAGE>
JANUS FEDERAL TAX-EXEMPT FUND October 31, 1997
- --------------------------------------------------------------------------------
Principal Amount Market Value
- --------------------------------------------------------------------------------
Georgia - 1.3%
$ 800,000 Burke County Development Authority Pollution
Control Revenue, (Georgia Power Company
Plant Vogtle Project), Variable Rate,
4.05%, 7/1/24 $ 800,000
- --------------------------------------------------------------------------------
Illinois - 5.5%
1,000,000 Metropolitan Pier and Exposition Authority
Hospitality Facilities Revenue, (McCormick
Place Convention Center Project), 7.00%,
7/1/26 1,181,250
2,000,000 Regional Transportation Authority,
(FGIC Insured), 6.00%, 6/1/23 2,212,500
- --------------------------------------------------------------------------------
3,393,750
- --------------------------------------------------------------------------------
Maryland - 1.6%
1,000,000 Maryland Health & Higher Educational Facilities
Authority Revenue, (John Hopkins
University), 5.125%, 7/1/20 967,500
- --------------------------------------------------------------------------------
Massachusetts - 4.6%
2,000,000 Massachusetts Port Authority Revenue,
Series A, 5.00%, 7/1/27 1,895,000
1,000,000 Massachusetts Turnpike Authority Metropolitan
Highway System Revenue, (MBIA Insured),
Series A, 5.00%, 1/1/37 941,500
- --------------------------------------------------------------------------------
2,836,500
- --------------------------------------------------------------------------------
Missouri - 5.5%
1,425,000 Carthage Waterworks and Wastewater
Treatment System Revenue, Series B,
6.50%, 7/1/16 1,505,156
2,000,000 Sikeston Electric Revenue, (MBIA Insured),
5.00%, 6/1/22 1,907,500
- --------------------------------------------------------------------------------
3,412,656
- --------------------------------------------------------------------------------
Montana - 3.0%
750,000 Montana Health Facilities Authority Facilities
Revenue, (St. Peters Community Hospital),
5.50%, 6/1/11 759,375
1,000,000 Montana State Board of Investment Workers
Compensation Program, (MBIA Insured),
6.875%, 6/1/20 1,092,499
- --------------------------------------------------------------------------------
1,851,874
- --------------------------------------------------------------------------------
New Jersey - 1.9%
1,000,000 New Jersey Turnpike Authority, Turnpike
Revenue, (FSA Insured), Series C,
6.50%, 1/1/16 1,163,750
- --------------------------------------------------------------------------------
New Mexico - 3.5%
2,000,000 University of New Mexico University Revenue,
Series A, 6.00%, 6/1/21 2,200,000
- --------------------------------------------------------------------------------
New York - 5.9%
1,000,000 New York State Dorm Authority Revenue,
(State University Educational Facilities),
Series A, 5.50%, 5/15/19 1,012,500
1,600,000 New York State Energy Research and Development
Authority Pollution Control Revenue,
(New York Electric and Gas), (Morgan
Guaranty Trust), Variable Rate,
Series C, 3.95%, 6/1/29 1,600,000
1,000,000 New York State Urban Development
Corporation Revenue, (University Facilities
Grants), 5.875%, 1/1/21 1,055,000
- --------------------------------------------------------------------------------
3,667,500
- --------------------------------------------------------------------------------
Oklahoma - 0.9%
500,000 McGee Creek Authority Water Revenue,
(MBIA Insured), 6.00%, 1/1/23 553,750
- --------------------------------------------------------------------------------
South Carolina - 3.1%
$2,000,000 Spartanburg Waterworks Revenue,
(FGIC Insured), 5.00%, 6/1/19 $ 1,927,500
- --------------------------------------------------------------------------------
Texas - 1.7%
1,000,000 Orange County Naval and Port District
Industrial Development Corp. Revenue,
(North Star Steel Texas), 6.375%, 2/1/17 1,088,750
- --------------------------------------------------------------------------------
Wyoming - 1.7%
1,000,000 Sweetwater County Pollution Control Revenue,
(Idaho Power Co.), Series A, 6.05%, 7/15/26 1,052,500
- --------------------------------------------------------------------------------
Total Municipal Securities (cost $57,446,082) 58,875,442
- --------------------------------------------------------------------------------
U.S. Government Obligation - 5.0%
3,000,000 U.S. Treasury Notes, 6.375%,
8/15/27 (cost $3,053,120) 3,089,400
- --------------------------------------------------------------------------------
Total Investments (total cost $60,499,202) - 99.9% 61,964,842
- --------------------------------------------------------------------------------
Cash, Receivables and Other Assets, net of Liabilities - 0.1% 89,967
- --------------------------------------------------------------------------------
Net Assets - 100% $62,054,809
- --------------------------------------------------------------------------------
FGIC - Financial Guaranty Insurance Corp.
FSA - Financial Security Assurance Corp.
MBIA - Municipal Bond Insurance Association Corp.
See Notes to Schedules of Investments
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 12
<PAGE>
JANUS SHORT-TERM BOND FUND Portfolio Manager, Sandy R. Rufenacht
Performance Review
Janus Short-Term Bond Fund had a total return of 7.70% during our fiscal
year ended October 31, 1997, versus a gain of 6.48% for the Lehman Brothers
Government/Corporate 1-3 Year Bond Index. Both results include reinvested
dividends.
For the fiscal year, Janus Short-Term Bond Fund ranked in the top 4% (4 out
of 100) of the Short-Term Investment Grade Debt Funds tracked by Lipper
Analytical Services, Inc., a large mutual fund rating company.(1)
The Fund outperformed the Lehman Index despite a narrow range of interest
rate movements for the entire year, coupled with a relatively flat yield curve.
A substantial cash position enabled us to be flexible and opportunistic with
respect to our expanding position in high-yield corporate bonds. Global turmoil,
ignited by the Asian currency crisis, produced a flight to quality, making U.S.
Treasury markets more attractive. The current portfolio configuration, as
indicated in the tables below, demonstrates broader diversification with no
appreciable decline in overall credit quality.
Portfolio Composition
- --------------------------------------------------------------------------------
Fund Data October 31, 1997 October 31, 1996
Weighted Avg. Maturity 2.4 Yrs. 2.4 Yrs.
Average Modified Duration* 2.0 Yrs. 2.0 Yrs.
30-Day Avg. Yield** 6.04% 5.75%
30-Day Avg. Yield
Without Reimbursement** 5.57% 5.26%
Average Rating A A
- --------------------------------------------------------------------------------
*A theoretical measure of price volatility.
**Yields will fluctuate.
- --------------------------------------------------------------------------------
Portfolio Asset Mix October 31, 1997 October 31, 1996
Investment-Grade Corp. Bonds 56.2% 69.0%
High-Yield/High-Risk Corp. Bonds 16.5% 5.0%
U.S. Treasury Bonds 21.7% 12.0%
Cash & Cash Equivalents 5.6% 14.0%
- --------------------------------------------------------------------------------
Our high-yield holdings were made up primarily of "cushion bonds" which are
likely to be called before they mature. Several highlights in this area include
All American Communications, recently acquired by Pearson PLC and tendered at
more than six points above our purchase price. Prior to the redemption, the Fund
benefited from its 10.88% coupon. Star Markets, a regional supermarket chain,
carries a 13% coupon, a premium in this low-yield environment, which we expect
the company will soon want to refinance. Investment-grade corporate bonds were
represented by well-known names such as SmithKline Beecham, Sherwin Williams,
and Ford Motor Credit. The Treasury portion of the portfolio consisted of a
single short-term note.
Portfolio Strategy
Flexibility is key to our pursuit of maximum yields with minimum risk.
While investment-grade bonds continue to make up a majority of the portfolio,
strategic increases in the size of our high-yield position allowed us to
maintain a competitive yield without taking on additional undue risk. Whereas
the Treasury and investment-grade positions lower credit risk, high-yield
holdings of low duration can help mitigate interest rate risk. The mix is
cost-effective as well, offering a wider range of attractive short-term
opportunities at a time when short supplies, caused by companies financing for
longer periods of time to lock in lower rates, had pushed up prices. By
continuing to selectively add short-term high-yield credits that are trading to
their call price, we can collect attractive coupons with a high degree of
safety. At the same time, we can lower interest rate risk as well as the
duration of the portfolio. Because we can leverage the synergies provided by
both our own firsthand fixed-income research and Janus' extensive equity
research, we focus on companies we know well and where we are confident in our
ability to accurately evaluate the credit quality.
Going Forward
While the Federal Reserve has been vigilant in keeping a tight rein on
inflation through timely short-term interest rate hikes, the recent Asian
currency crisis and its damping effect on U.S. financial markets has brought
forth a new scenario: deflation, or a decline in prices for goods and services.
While the jury is still out, this scenario might call for a decrease in
short-term interest rates, which would definitely bear watching. Regardless, the
portfolio's flexibility should keep it poised to respond quickly and effectively
to rate changes. The portfolio mix should also keep yields competitive and
result in a stable net asset value.
Thank you for your continued investment in Janus Short-Term Bond Fund.
- --------------------------------------------------------------------------------
(1) Lipper Analytical Services, Inc. defines Short-Term Investment Grade Debt
Funds as investing "at least 65% of assets in investment grade debt issues
(rated in top four grades) with dollar-weighted average maturities of 5
years or less." As of October 31, 1997, Janus Short-Term Bond Fund ranked
40/75 of Short-Term Investment Grade Debt Funds for the 3-year period and
22/40 for the 5-year period. The Lipper ranking is based on total return,
including reinvestment of dividends and capital gains for the stated
period. Past performance does not guarantee future results.
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 13
<PAGE>
JANUS SHORT-TERM BOND FUND Portfolio Manager, Sandy R. Rufenacht
Performance Overview
GRAPHIC
A graphic comparison of the change in value of a hypothetical $10,000 investment
in Janus Short-Term Bond Fund and the Lehman Brothers 1-3 Year
Government/Corporate Bond Index. Janus Short-Term Bond Fund is represented by a
solid green line. The Lehman Brothers 1-3 Year Government/Corporate Bond Index
is represented by a single dashed black line. The "y" axis reflects the value of
the investment. The "x" axis reflects the computation periods from inception,
September 1, 1992, through October 31, 1997. The upper right quadrant reflects
the ending value of the hypothetical investment in Janus Short-Term Bond Fund
($12,988) as compared to the Lehman Brothers 1-3 Year Government/Corporate Bond
Index ($13,090). There is a legend in the upper left quadrant of the graph which
indicates Janus Short-Term Bond Fund's one-year, five-year and since inception
(September 1, 1992) average annual total returns as 7.70%, 5.41% and 5.19%,
respectively.
*The Fund's inception date
Source - Lipper Analytical Services, Inc. 1997.
All returns reflect reinvested dividends. Past performance is not predictive of
future performance. Investment return and principal value may fluctuate so that
shares, when redeemed, may be worth more or less than their original cost. The
Fund's portfolio may differ significantly from the securities in the index. The
index is unmanaged and therefore does not reflect the cost of portfolio
management or trading.
JANUS SHORT-TERM BOND FUND October 31, 1997
- --------------------------------------------------------------------------------
Principal Amount Market Value
- --------------------------------------------------------------------------------
Corporate Bonds - 72.7%
- --------------------------------------------------------------------------------
Aerospace and Defense - 3.1%
$1,750,000 Lockheed Martin Corp., 6.55%
company guaranteed unsecured notes,
due 5/15/99 $1,767,500
- --------------------------------------------------------------------------------
Broadcast Services and Programming - 3.5%
2,000,000 TCI Communications, Inc., 6.375%
senior notes, due 9/15/99 2,002,500
- --------------------------------------------------------------------------------
Computers - Mainframe - 3.0%
1,750,000 IBM Corp., 6.375%
global notes, due 6/15/00 1,765,312
- --------------------------------------------------------------------------------
Containers - Metal and Glass - 3.0%
1,750,000 Crown Cork & Seal Co., Inc., 5.875%
notes, due 4/15/98 1,749,965
- --------------------------------------------------------------------------------
Finance - Auto Loans - 6.1%
1,750,000 Ford Motor Credit Corp., 7.25%
notes, due 5/15/99 1,785,000
1,750,000 General Motors Acceptance Corp., 6.65%
notes, due 5/24/00 1,771,875
- --------------------------------------------------------------------------------
3,556,875
- --------------------------------------------------------------------------------
Finance - Credit Card - 3.0%
1,750,000 First USA Bank, Inc., 5.75%
notes, due 1/15/99 1,747,812
- --------------------------------------------------------------------------------
Food - Diversified - 3.1%
1,800,000 Grand Metropolitan Investment Corp., 6.50%
company guaranteed notes, due 9/15/99 1,813,500
- --------------------------------------------------------------------------------
Food - Retail - 3.4%
$ 270,000 Pathmark Stores, Inc., 12.625%
subordinated notes, due 6/15/02 $ 273,375
500,000 Ralphs Grocery Co., 11.00%
senior subordinated notes, due 6/15/05 548,750
1,010,000 Star Markets Co., Inc., 13.00%
senior subordinated notes, due 11/1/04 1,148,875
- --------------------------------------------------------------------------------
1,971,000
- --------------------------------------------------------------------------------
Hotels and Motels - 2.2%
1,250,000 Hyatt Equities, L.L.C., 6.80%
notes, due 5/15/00+ 1,265,625
- --------------------------------------------------------------------------------
Life and Health Insurance - 0.3%
185,000 Penncorp Financial Group, Inc., 9.25%
senior subordinated notes, due 12/15/03 192,863
- --------------------------------------------------------------------------------
Medical - Drugs - 4.4%
2,500,000 SmithKline Beecham PLC, 6.75%
company guaranteed notes, due 10/30/01 2,559,375
- --------------------------------------------------------------------------------
Motion Pictures and Services - 1.0%
500,000 All American Communications, Inc.,
10.875% senior subordinated notes,
due 10/15/01 553,750
- --------------------------------------------------------------------------------
Multi-Line Insurance - 3.1%
1,750,000 International Lease Finance Corp., 6.625%
notes, due 4/1/99 1,767,500
- --------------------------------------------------------------------------------
Multimedia - 3.0%
1,750,000 Time Warner, Inc., 4.90%
bonds, due 7/29/99+ 1,710,625
- --------------------------------------------------------------------------------
Oil Companies - Exploration and Production - 1.0%
500,000 Mesa Operating Co., 10.625%
unsecured company guaranteed notes,
due 7/1/06 575,000
- --------------------------------------------------------------------------------
See Notes to Schedules of Investments
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 14
<PAGE>
JANUS SHORT-TERM BOND FUND October 31, 1997
- --------------------------------------------------------------------------------
Principal Amount Market Value
- --------------------------------------------------------------------------------
Oil Companies - Integrated - 3.1%
$ 1,750,000 Texaco Capital, Inc., 6.875%
notes, due 7/15/99 $ 1,778,437
- --------------------------------------------------------------------------------
Paint and Related Products - 3.5%
2,000,000 Sherwin-Williams Co., 6.25%
notes, due 2/1/00 2,010,000
- --------------------------------------------------------------------------------
Physical Therapy and Rehabilitation Centers - 2.7%
1,500,000 HEALTHSOUTH Corp., 9.50%
senior subordinated notes, due 4/1/01 1,573,125
- --------------------------------------------------------------------------------
Retail - Discount - 3.0%
1,750,000 TJX Companies, Inc., 6.625%
notes, due 6/15/00 1,765,313
- --------------------------------------------------------------------------------
Retail - Diversified - 1.9%
1,000,000 Eye Care Centers of America, Inc., 12.00%
senior notes, due 10/1/03 1,085,000
- --------------------------------------------------------------------------------
Savings/Loan/Thrifts - 4.8%
965,000 Anchor Bancorp, Inc., 8.9375%
senior notes, due 7/9/03 1,004,806
1,750,000 Great Western Financial Corp., 6.125%
notes, due 6/15/98 1,752,695
- --------------------------------------------------------------------------------
2,757,501
- --------------------------------------------------------------------------------
Steel - Producers - 1.8%
1,000,000 Bayou Steel Corp., 10.25%
first mortgage notes, due 3/1/01 1,028,750
- --------------------------------------------------------------------------------
Super-Regional Banks - 3.0%
1,750,000 Norwest Corp., 6.25%
senior notes, due 4/15/99 1,758,750
- --------------------------------------------------------------------------------
Television - 1.8%
1,000,000 Allbritton Communications, 11.50%
senior subordinated debentures, due 8/15/04 1,048,750
- --------------------------------------------------------------------------------
Transportation - Railroad - 3.0%
1,750,000 Union Pacific Corp., 6.25%
notes, due 3/15/99 1,756,563
- --------------------------------------------------------------------------------
Wire and Cable Products - 0.9%
500,000 International Wire Group, 11.75%
senior subordinated notes, due 6/1/05 545,000
- --------------------------------------------------------------------------------
Total Corporate Bonds (cost $41,747,948) 42,106,391
- --------------------------------------------------------------------------------
U.S. Government Obligation - 21.7%
12,500,000 U.S. Treasury Note, 6.00%
due 6/30/99 (cost $12,521,452) 12,571,000
- --------------------------------------------------------------------------------
Short-Term Corporate Notes - 3.5%
Household Finance Corp.
2,000,000 5.68%, 11/3/97 1,999,369
(amortized cost $1,999,369)
- --------------------------------------------------------------------------------
Total Investments (total cost $56,268,769) - 97.9% 56,676,760
- --------------------------------------------------------------------------------
Cash, Receivables and Other Assets, net of Liabilities - 2.1% 1,231,004
- --------------------------------------------------------------------------------
Net Assets - 100% $57,907,764
- --------------------------------------------------------------------------------
See Notes to Schedules of Investments
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 15
<PAGE>
JANUS MONEY MARKET FUNDS Portfolio Manager, Sharon S. Pichler
The Year in Review
During the fiscal year ended October 31, 1997, short-term interest rates
experienced only moderate volatility. This was in sharp contrast to
intermediate- and long-term rates, which were very sensitive to signs of
economic strength or weakness and oscillated dramatically through much of the
year. In general, short-term interest rates are less sensitive to economic
conditions and instead react to changes in the federal funds rate, which the
Federal Reserve Board raised only once during the period.
Federal Reserve Chairman Alan Greenspan continued to express concerns about
the high level of stock prices throughout the 12 months. His remarks introduced
additional volatility into the capital markets, but there was very little
spillover into money market yields. Yield on the one-year Treasury reached a
high of 6.07% during the year, but the "flight to quality" that began when the
economic crisis in Southeast Asia intensified pulled the rate down to 5.21% at
the end of October.
Although concerns about a second federal funds rate hike persisted, none
occurred, primarily because inflation remained dormant. The overbuilt
manufacturing capacity in Southeast Asia increases the likelihood that prices of
many imports will move lower, which in turn will help keep the lid on inflation
in the U.S.
That explains why the current consensus is that the Federal Reserve Board
will not raise rates anytime soon, despite low unemployment and solid growth in
the housing market. Given global economic conditions, I have to agree.
Janus Money Market Fund
For much of the year, assets remained primarily in very short-term
obligations, where rates were highly competitive with longer-term debt (six
months to one year). I did not lock the Fund into longer obligations unless I
believed we were being adequately paid for the extra time exposure. I also made
use of "plain vanilla" floating rate instruments (or floaters) from top-rated
issuers. The yield on floaters adjusts (or floats) up and down with interest
rates. Floaters helped us maintain flexibility and liquidity with a little
better yield, and held down transaction costs.
During the year, assets in the Fund grew from approximately $2.5 billion to
just under $3.9 billion. This growth was very gratifying, and reflects a growing
awareness of Janus' emphatic commitment to all aspects of money management. It
was, however, a little surprising that there were not more inflows, given the
volatility of the stock market near year-end. That investors chose to ride out
the turbulence speaks well for their confidence in Janus' equity management. It
also indicates an appetite for stocks and a level of education that takes into
account the trade-off between risk and reward.
Still, money market funds remain a good choice for the cash portion of an
investor's portfolio.
Janus Money Market Fund's weighted average maturity was just 37 days as of
October 31, 1997, versus 40 days on October 31, 1996. The Fund is rated Aa by
Moody's. Moody's analyzes the Fund's credit quality, market price exposure, and
management.
For the 12 months ended October 31, Janus Money Market Fund ranked 45 out
of 302 funds (top 15%) in the U.S. Money Market category defined by Lipper
Analytical Services, Inc., a mutual fund rating company.(1)
Janus Government Money Market Fund
Government money market instruments had a quiet year. The only major
occurrence was the step up in federal funds back in March. Maturities were kept
very short and government floaters were used to pick up small but meaningful
yield increments over the course of the year. Government floaters adjust their
yields with changes in interest rates. They allowed us to maintain flexibility
and good liquidity, with a slightly better yield.
All government debt in the Fund is rated AAA, the highest credit quality
available. Janus Government Money Market Fund also has a rating of Aaa from
Moody's Investor Services, which analyzes the Fund's credit quality, market
price exposure, and management. The portfolio had a weighted average maturity of
33 days on October 31, 1997.
For the 12 months ended October 31, Janus Government Money Market Fund
ranked 19 of 118 funds (top 16%) in the U.S. Government Money Market category
defined by Lipper Analytical Services, Inc., a mutual fund rating company.(1)
Janus Tax-Exempt Money Market Fund
We had a stable year in the tax-exempt market. The single change in the
federal funds rate was largely responsible. As usual, the market was seasonal,
with redemptions increasing around tax time and when college tuition was due,
and purchases mounting in between.
Long-term and short-term rates were very close for much of the period, so I
continued to opt for the greater flexibility of short-term securities. The
Fund's weighted average maturity was 54 days as of October 31.
For the 12 months ended October 31, Janus Tax-Exempt Money Market Fund
ranked 29 of 137 funds (top 21%) in the U.S. Tax-Exempt Money Market category
defined by Lipper Analytical Services, Inc., a mutual fund rating company.(1)
Thank you for your investment and confidence in Janus Money Market Funds.
- --------------------------------------------------------------------------------
(1) Lipper Analytical Services defines a U.S. Money Market Fund as one that
invests "in high-quality financial instruments rated in the top two grades
with dollar-weighted average maturities of less than 90 days" and that
intends "to keep constant net asset value." Lipper defines a U.S.
Government Money Market Fund as one that "invests principally in financial
instruments issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, with dollar-weighted average maturities of less than 90
days," and that intends "to keep constant net asset value." Lipper defines
a Tax-Exempt Money Market Fund as one that "invests in high-quality
municipal obligations with dollar-weighted average maturities of less than
90 days," and that intends "to keep constant net asset value." Past
performance does not guarantee future results. Lipper rankings are based on
total return, including reinvestment of dividends and capital gains.
Money market funds are neither insured nor guaranteed by the U.S. government and
there can be no assurance that money market funds will be able to maintain a
$1.00 per share price.
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 16
<PAGE>
JANUS MONEY MARKET FUND October 31, 1997
- --------------------------------------------------------------------------------
Principal Amount Market Value
- --------------------------------------------------------------------------------
Short-Term Corporate Notes - 25.7%
$42,300,000 AES Shady Point, Inc.
5.61%, 1/15/98 $ 41,805,618
7,500,000 Associates Corp. of North America
8.125%, senior notes 1/15/98 7,533,876
BTM Capital Corp.:
20,000,000 5.63%, 11/18/97 19,946,827
19,790,000 5.68%, 11/28/97 19,711,939
45,000,000 5.66%, 1/15/98 44,469,375
15,000,000 5.70%, 1/20/98 14,810,000
26,000,000 5.70%, 1/21/98 25,666,550
20,000,000 5.70%, 1/30/98 19,721,333
8,000,000 Casio Phonemate, Inc.
5.66%, 01/16/98 7,904,408
27,810,000 Fundex Corp.
5.59%, 11/10/97 27,771,135
50,000,000 General Motors Acceptance Corp.
5.84%, 11/7/97 49,951,333
Heller Financial, Inc.:
25,000,000 5.63%, 11/26/97 24,902,258
25,000,000 5.73%, 1/16/98 24,697,583
Heller International, Inc.:
25,000,000 5.60%, 12/17/97 24,821,111
50,000,000 5.64%, 12/23/97 49,592,667
Kubota Finance Corp.:
36,500,000 5.65%, 11/3/97 36,488,543
36,000,000 5.61%, 11/14/97 35,927,070
40,000,000 5.61%, 11/17/97 39,900,266
Mitsubishi Motors Credit of America:
15,000,000 5.60%, 12/2/97 14,927,667
15,000,000 5.61%, 12/3/97 14,925,200
20,000,000 5.64%, 1/16/98 19,761,867
14,000,000 NS Finance, Inc.
5.65%, 11/10/97 13,980,225
30,000,000 Onoda USA, Inc.
5.62%, 11/12/97 29,948,484
Orix America, Inc.:
26,500,000 5.62%, 11/6/97 26,479,315
33,200,000 5.62%, 11/25/97 33,075,611
11,800,000 5.63%, 11/25/97 11,755,710
32,800,000 5.63%, 12/12/97 32,589,688
50,000,000 Sanwa Business Credit
5.65%, 11/5/97 49,968,612
SRD Finance, Inc.:
15,000,000 5.60%, 12/11/97 14,906,667
39,000,000 5.60%, 12/18/97 38,714,867
Sumitomo Bank Capital Markets
20,000,000 5.61%, 11/19/97 19,943,900
25,000,000 5.73%, 11/25/97 24,912,460
25,000,000 Sumitomo Bank of New York
5.62%, 11/3/97 24,992,194
10,000,000 Tomen America, Inc.
5.63%, 11/21/97 9,968,724
75th State Street:
58,892,000 5.62%, 11/12/97 58,790,869
25,832,000 5.61%, 11/14/97 25,779,668
- --------------------------------------------------------------------------------
Total Short-Term Corporate Notes (amortized cost $981,043,620) 981,043,620
- --------------------------------------------------------------------------------
Taxable Variable Rate Demand Notes - 39.0%
13,700,000 ABAG Finance Authority for Nonprofit
Corporations, California, Certificates of
Participation, Series C, 5.70%, 10/1/27 13,700,000
American Honda Finance Corp.:
25,000,000 5.7678%, 4/6/98 24,997,939
50,000,000 5.7187%, 6/23/98 50,000,000
10,000,000 5.7187%, 7/8/98 10,000,000
25,000,000 5.8125%, 7/27/98 25,000,000
22,000,000 5.75%, 8/3/98 22,000,000
50,000,000 5.75%, 8/14/98 50,000,000
- --------------------------------------------------------------------------------
Taxable Variable Rate Demand Notes - (continued)
$11,000,000 APTC Plastics Acquiring Co., L.L.C.
5.75%, 4/1/17 $11,000,000
40,000,000 Bank of America, N.A.
5.65%, 4/16/98 39,987,266
Bankers Trust Company of New York:
60,000,000 5.70%, 11/7/97 59,999,960
25,000,000 5.70%, 4/3/98 24,997,835
45,000,000 5.65%, 7/15/98 44,984,683
10,385,000 Bannockburn Associates, L.L.C.
5.80%, 4/1/27 10,385,000
48,000,000 Comerica Bank of Detroit, 5.67%,
medium term notes, 4/6/98 47,989,853
14,960,000 Community Health System, Inc.,
Series A, 5.80%, 10/1/03 14,960,000
75,000,000 CP Trust Certificates, Series 1996-2,
5.715%, 12/26/97 75,000,000
35,510,000 Crouse Health Hospital, Inc.,
5.75%, 7/1/17 35,510,000
25,000,000 Crozer-Keystone Health Systems,
5.67%, 12/15/21 25,000,000
9,100,000 Eagle County, Colorado Housing Facility
Authority, (BC Housing L.L.C. Project),
Series A, 5.6562%, 6/1/27 9,100,000
50,000,000 FCC National Bank of Wilmington,
Delaware, 5.62%, 2/20/98 49,988,313
General American Life Insurance Co.:
50,000,000 5.84%, 2/20/98 50,000,000
30,000,000 5.84%, 8/13/98 30,000,000
80,000,000 5.84%, 12/31/98 80,000,000
General Motors Acceptance Corp.:
11,000,000 5.957%, 2/2/98 11,006,565
10,745,000 5.7539%, medium term notes, 4/17/98 10,745,000
50,000,000 5.7285%, medium term notes, 4/22/98 49,984,825
12,700,000 Genesys Michigan Health System, Inc.,
Series A, 5.66%, 4/1/20 12,700,000
8,700,000 H/M Partners, L.L.C.
5.75%, 10/1/20 8,700,000
50,000,000 Household Finance Corp., 5.72%,
medium term notes, 5/7/98 50,000,000
9,600,000 Jackson County, Alabama Industrial
Development, (Beaulieu America
Project), 5.80%, 7/1/10 9,600,000
50,000,000 Merrill Lynch & Co.,
5.72%, medium term notes, 4/17/98 50,000,000
75,000,000 Morgan Stanley Dean Witter Discover and Co.
5.625%, 3/9/98 75,000,000
50,000,000 National Bank of Canada,
5.64%, 10/8/98 49,972,945
24,200,000 New Jersey Economic Development Authority
Revenue, Series A, 5.6562%, 10/1/21 24,200,000
13,800,000 Pasadena California COPS, (Los Robles
Avenue Parking Facility Project),
5.75%, 11/1/12 13,800,000
PHH Corp.:
25,000,000 5.6782%, medium term notes, 8/4/98 24,992,661
25,000,000 5.69%, medium term notes, 8/4/98 24,998,145
45,000,000 5.68%, medium term notes, 10/6/98 44,991,806
43,000,000 PNC Bank, N.A., 5.6523%,
medium term notes, 6/5/98 42,999,905
25,000,000 Rehau, Inc.,
5.75%, 10/1/19 25,000,000
17,520,000 Rockland Financial Ltd.,
5.75%, 12/1/26 17,520,000
7,400,000 San Bernardino County, California,
(Capital Improvement Refining Project),
5.90%, 11/1/25 7,400,000
9,365,000 San Jose, California Financing Authority,
(Hayes Mansion Revenue Project),
Series A, 5.80%, 12/1/25 9,365,000
- --------------------------------------------------------------------------------
See Notes to Schedules of Investments
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 17
<PAGE>
JANUS MONEY MARKET FUND October 31, 1997
- --------------------------------------------------------------------------------
Principal Amount Market Value
- --------------------------------------------------------------------------------
Taxable Variable Rate Demand Notes - (continued)
Shizuoka Bank:
$40,000,000 5.605%, 6/15/98 $39,993,019
18,000,000 5.6525%, 10/26/98 18,000,000
35,000,000 Societe Generale
5.67%, 7/31/98 34,992,364
17,800,000 St. Joseph Health Systems of California,
Series A, 5.96%, 7/1/11 17,800,000
5,245,000 Union City, Tennessee Industrial Development
Board, (Cobank Limited, L.L.C., Project),
5.85%, 1/1/25 5,245,000
5,000,000 Venturecor, Inc., Healthcare Revenue,
5.85%, 5/15/35 5,000,000
- --------------------------------------------------------------------------------
Total Taxable Variable Rate Demand Notes
(amortized cost $1,488,608,084) 1,488,608,084
- --------------------------------------------------------------------------------
Certificates Of Deposit - 21.0%
50,000,000 Bank of Tokyo
5.765%, 1/23/98 50,000,000
Banque Nationale de Paris:
48,500,000 5.76%, 2/27/98 48,493,995
25,000,000 6.02%, 10/30/98 25,000,000
Canadian Imperial Bank of Commerce:
25,000,000 5.97%, 3/19/98 24,997,258
25,000,000 5.88%, 10/14/98 24,985,227
Fuji Bank Ltd.:
50,000,000 5.718%, 11/3/97 50,000,132
50,000,000 5.67%, 11/5/97 50,000,000
50,000,000 5.62%, 11/17/97 50,000,000
Industrial Bank of Japan, Ltd.:
50,000,000 5.82%, 11/5/97 50,000,000
27,000,000 5.80%, 11/12/97 27,000,279
50,000,000 5.65%, 12/22/97 50,000,000
25,000,000 Midland Bank PLC
5.90%, 11/7/97 25,000,000
National Bank of Canada:
25,000,000 6.08%, 9/8/98 25,000,000
40,000,000 6.082%, 11/17/98 40,000,000
Norinchunkin Bank Ltd.:
50,000,000 5.70%, 11/5/97 50,000,000
10,000,000 5.68%, 1/7/98 10,000,184
50,000,000 5.75%, 1/20/98 50,000,000
Societe Generale:
50,000,000 5.82%, 1/7/98 50,000,000
50,000,000 5.85%, 3/3/98 49,993,604
25,000,000 6.17%, 5/8/98 24,997,543
25,000,000 5.89%, 10/14/98 24,993,180
- --------------------------------------------------------------------------------
Total Certificates of Deposit (cost $800,461,402) 800,461,402
- --------------------------------------------------------------------------------
Promissory Notes - 10.0%
230,000,000 Goldman Sachs Group, L.P. 5.75%, 1/20/98 230,000,000
150,000,000 Morgan Stanley, 5.85%, 12/26/97 150,000,000
- --------------------------------------------------------------------------------
Total Promissory Notes (cost $380,000,000) 380,000,000
- --------------------------------------------------------------------------------
Put Bonds - 1.4%
18,900,000 Bedford County, Virginia Industrial
Development Authority, Series 95D,
5.68%, 11/14/97 18,900,000
18,500,000 Los Angeles County, California Metropolitan
Transit Authority, 5.90%, 1/22/98 18,500,000
Northglenn Colorado Urban Renewal Authority,
(Northglenn Mall Project):
8,700,000 Series A-2, 5.95%, 12/11/97 8,700,000
5,700,000 Series B, 5.95%, 12/1/16 5,700,000
- --------------------------------------------------------------------------------
Total Put Bonds (cost $51,800,000) 51,800,000
- --------------------------------------------------------------------------------
Medium-Term Notes - 0.2%
7,155,000 Household Finance Corp., 7.91%,
medium term notes, 2/6/98 (cost $7,192,792) 7,192,792
- --------------------------------------------------------------------------------
Repurchase Agreements - 7.4%
$205,000,000 BZW Securities, Inc.
5.85%, dated 10/31/97, maturing 11/3/97,
to be repurchased at $205,099,938,
collateralized by $8,945,000 in WFS
Financial Owner Trust, 6.65%, 8/20/00;
$10,000,000 in Toyota Auto Lease Trust,
6.20% - 6.35%, 4/26/04; $10,300,000 in
The Money Store Home Equity Trust,
6.625% - 6.825%, 10/15/08 - 7/15/21;
$20,325,000 in Standard Credit Card
Master Trust, 5.90% - 7.875%, 11/7/98 -
2/9/01; $1,000,000 in Citibank Credit
Card Master Trust, 5.8238%, 9/15/05;
$3,500,000 in Student Loan Marketing
Association., 5.7583%, 1/25/10;
$9,931,534 in Prudential Home Mortgage
Securities, 6.3375% - 6.9034%, 8/25/08 -
10/25/08; $10,000,000 in Provident Bank
Home Equity Loan Trust, 5.8563%,
4/25/28; $5,000,000 in Nellie Mae, Inc.,
5.885%, 12/15/18; $20,000,000 in
NationsBank Credit Card Master Trust,
6.00%, 12/15/05; $270,000 in TMS Auto
Grantor Trust, 6.25%, 6/20/03;
$3,273,240 in MBNA Master Credit Card
Trust, 5.785% - 5.795%, 3/15/03 -
8/15/14; $10,000,000 in Keycorp Student
Loan Trust, 5.8863%, 9/27/24; $5,570,000
in Ford Credit Auto Loan Master Trust,
5.88% - 6.50%, 8/15/02 - 2/15/03;
$17,000,000 in First USA Credit Card
Master Trust, 5.78% - 6.42%, 11/15/03 -
3/17/05; $12,500,000 in Equicon Home
Equity Loan Trust, 6.105%, 5/18/25;
$7,700,000 in Discover Card Trust,
7.85%, 11/21/00; $34,850,000 in Daiwa
Mortgage Acceptance Corp., 6.3875%,
10/25/19; $160,000 in Contimortgage Home
Equity Loan Trust, 7.01%, 8/15/13;
$5,000,000 in Chase Manhattan RV Owner
Trust, 6.23%, 12/15/07; $31,300,000 in
Capital Equipment Receivables Trust,
5.95% - 6.28%, 7/15/99 - 6/15/00;
$8,700,000 in CTS Adjustable Rate
Mortgage Trust, 6.2975%, 5/25/26;
$15,500,000 in Advanta Mortgage Loan
Trust 6.35% - 7.10%, 4/25/20 - 10/25/21
with respective values of $9,001,998,
$10,002,825, $9,543,518, $20,556,677,
$997,909, $3,500,000, $9,921,602,
$8,622,946, $5,000,000, $19,828,440,
$270,971, $3,244,506, $10,000,000,
$5,576,076, $17,131,354, $12,515,000,
$7,831,277, $1,780,651, $165,217,
$5,000,000, $31,226,930, $3,260,409,
$14,121,694 $205,000,000
50,000,000 NationsBank,
5.8125%, dated 10/31/97, maturing
11/3/97, to be repurchased at
$50,024,219 collateralized by $4,770,000
in Countrywide Mortgage Backed
Securities, Inc., 6.25%, 7/25/09;
$2,238,000 in Residential Asset
Securitization Trust, 7.25%, 10/25/27;
$3,400,000 in GE Capital Mortgage
Services, Inc., 6.2083%, 12/25/23;
$11,000,000 in GE Capital Mortgage
Services, Inc., 6.50%, 3/25/24;
$6,536,765 in GE Capital Mortgage
Services, Inc., 6.75%, 3/25/27;
$1,010,000 in Morgan Stanley Capital I,
7.46%, 2/15/20; $10,000,000 in Mortgage
Capital Funding, Inc., 7.35%, 7/15/05;
$15,331,084 in Mortgage Capital Funding,
Inc., 7.008%, 9/20/06 with respective
values $4,531,513, $2,256,889,
$19,489,508, $1,010,000, $23,712,090 50,000,000
- --------------------------------------------------------------------------------
See Notes to Schedules of Investments
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 18
<PAGE>
JANUS MONEY MARKET FUND October 31, 1997
- --------------------------------------------------------------------------------
Principal Amount Market Value
- --------------------------------------------------------------------------------
$28,800,000 Lehman Brothers, Inc.,
5.64%, dated 10/31/97, maturing 11/3/97,
to be repurchased at $28,813,536,
collateralized by $8,650,000 in Citicorp
Mortgage Securities, Inc., 6.50%,
2/25/24; $2,395,000 in Citicorp Mortgage
Securities, Inc., 5.75%, 6/25/09;
$425,000 in GE Capital Mortgage
Services, Inc., 10.417%, 12/25/23;
$32,681,000 in Residential Funding
Mortgage Securities I, 6.104%, 6/25/08;
$2,159,850 in Residential Funding
Mortgage Securities I, 6.204%, 12/25/23;
$5,926,000 in Saxon Mortgage Securities,
Corp., 6.75%, 4/25/24 with respective
values $9,530,700, $2,560,458, $512,203,
$8,298,648, $2,084,196, $6,388,073 $28,800,000
- --------------------------------------------------------------------------------
Total Repurchase Agreements (cost $283,800,000) 283,800,000
- --------------------------------------------------------------------------------
Total Investments (total cost $3,992,905,898) - 104.7% 3,992,905,898
- --------------------------------------------------------------------------------
Liabilities, net of Cash, Receivables and Other Assets - (4.7%) (178,956,709)
- --------------------------------------------------------------------------------
Net Assets - 100% $3,813,949,189
- --------------------------------------------------------------------------------
See Notes to Schedules of Investments
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 19
<PAGE>
JANUS GOVERNMENT MONEY MARKET FUND October 31, 1997
- --------------------------------------------------------------------------------
Principal Amount Market Value
- --------------------------------------------------------------------------------
U.S. Government Agency Discount Notes - 19.7%
Fannie Mae:
$1,000,000 9.15%, 4/10/98 $1,012,737
2,000,000 5.89%, 5/21/98 1,998,578
Federal Farm Credit Bank:
2,581,000 5.61%, 11/5/97 2,579,391
2,000,000 5.69%, 5/20/98 1,936,778
1,165,000 5.43%, 8/7/98 1,115,974
Federal Home Loan Bank System:
3,000,000 5.38%, 12/15/97 2,980,273
5,000,000 5.50%, 2/13/98 4,920,556
10,000,000 5.589%, 3/4/98 9,999,563
1,615,000 5.69%, 10/2/98 1,614,835
5,000,000 5.432%, 10/6/98 4,995,426
- --------------------------------------------------------------------------------
Total U.S. Government Agency Discount Notes
(amortized cost $33,154,111) 33,154,111
- --------------------------------------------------------------------------------
U.S. Government Agency Variable Notes - 14.6%
5,000,000 Fannie Mae
5.465%, 2/13/98 4,999,174
Federal Farm Credit Bank:
3,000,000 5.50%, 11/14/97 2,999,866
5,000,000 5.55%, 2/20/98 4,998,973
Federal Home Loan Bank System:
5,000,000 5.491%, 12/26/97 4,999,412
750,000 6.00%, 6/29/98 751,687
Student Loan Marketing Association:
5,000,000 5.27%, 11/24/97 4,999,776
1,000,000 5.40%, 2/17/98 999,937
- --------------------------------------------------------------------------------
Total U.S. Government Agency Variable Notes
(amortized cost $24,748,825) 24,748,825
- --------------------------------------------------------------------------------
Short-Term Corporate Notes - 15.2%
3,000,000 Downey Savings and Loan
5.49%, 12/29/97 2,973,465
6,639,000 Kirksville College of Osteopathic
5.48%, 12/11/97 6,598,576
New Hampshire Higher Education Loan:
3,800,000 5.50%, 11/7/97 3,796,517
5,000,000 5.50%, 11/13/97 4,990,833
USA Group Secondary Market Services:
4,249,000 5.46%, 11/10/97 4,243,200
3,000,000 5.50%, 11/17/97 2,992,667
- --------------------------------------------------------------------------------
Total Short-Term Corporate Notes (amortized cost $25,595,258) 25,595,258
- --------------------------------------------------------------------------------
Repurchase Agreements - 53.0%
40,000,000 CS First Boston, 5.80%
dated 10/31/97, maturing 11/3/97, to be
repurchased at $40,019,333,
collateralized by $32,900,000 in Freddie
Mac 6.80% - 7.50%, 4/15/20 - 12/15/18;
$56,475,000 in Fannie Mae 6.50% - 9.50%,
11/25/13 - 11/25/20 with respective
values of $27,306,632 and $13,729,723 40,000,000
39,300,000 HSBC Secutities, Inc., 5.77%, dated
10/31/97, maturing 11/3/97, to be
repurchased at $39,318,897,
collateralized by $23,053,000 in Freddie
Mac Adjustable Rate Mortgage 7.904%,
6/1/24 and $37,485,000 in Fannie Mae
Adjustable Rate Mortgage 6.114%, 11/1/22
with respective values of $10,799,191
and $29,289,491 39,300,000
- --------------------------------------------------------------------------------
Repurchase Agreements - (continued)
$10,000,000 Lehman Brothers, 5.68%,
dated 10/31/97, maturing 11/3/97, to be
repurchased at $10,004,733, collateralized
by $3,880,000 in Countrywide Funding Corp.
10.00%, 3/25/24; $4,995,000 in Housing
Securities, Inc. 6.50%, 3/25/09; $6,272,000
in Ryland Mortgage Securities Corp. 7.228%,
1/25/21; $2,088,803 in Structured Asset
Securities Corp. 7.8607%, 9/25/36; $350,000
in Lehman Large Loan cmo 6.79%, 10/12/34
with respective values of $2,406,321,
$4,758,455, $2,246,287, $433,926
and $354,882 $ 10,000,000
- --------------------------------------------------------------------------------
Total Repurchase Agreements (cost $89,300,000) 89,300,000
- --------------------------------------------------------------------------------
Total Investments (cost $172,798,194) - 102.5% 172,798,194
- --------------------------------------------------------------------------------
Liabilities, net of Cash, Receivables and Other Assets - (2.5%) (4,260,891)
- --------------------------------------------------------------------------------
Net Assets - 100% $168,537,303
- --------------------------------------------------------------------------------
See Notes to Schedules of Investments
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 20
<PAGE>
JANUS TAX-EXEMPT MONEY MARKET FUND October 31, 1997
- --------------------------------------------------------------------------------
Principal Amount Market Value
- --------------------------------------------------------------------------------
Variable Rate Demand Notes - 73.4%
- --------------------------------------------------------------------------------
Alabama - 1.6%
$1,000,000 Athens Industrial Development Board Revenue,
(Coilplus Income Project), 3.80%, 9/1/99 $1,000,000
400,000 North Alabama Environmental Impact Authority
Pollution Control Revenue, (Reynolds
Metals), 4.05%, 12/1/00 400,000
- --------------------------------------------------------------------------------
1,400,000
- --------------------------------------------------------------------------------
Arizona - 3.2%
2,700,000 Phoenix Development Authority Multifamily
Housing Revenue, (Sunset Ranch), 3.65%,
12/1/27 2,700,000
- --------------------------------------------------------------------------------
California - 1.1%
400,000 California Statewide Communities Development
Authority Apartment Development Revenue,
(Whispering Winds Apartments), Series D,
3.60%, 12/1/22 400,000
500,000 Carlsbad Housing and Redevelopment
Community, (Seascape Village Project),
3.60%, 12/1/05 500,000
- --------------------------------------------------------------------------------
900,000
- --------------------------------------------------------------------------------
Colorado - 5.8%
410,000 Colorado Health Facility Authority Revenue,
(Valley View Hospital Association Project),
4.25%, 10/1/12 410,000
2,775,000 Denver City and County Multi-Family Housing
Revenue, (Ogden Residences Project),
4.25%, 12/1/09 2,775,000
1,250,000 Englewood Industrial Development Revenue,
(Swedish Mobility Limited Project),
3.85%, 12/1/10 1,250,000
490,000 University of Northern Colorado Revenue
Auxiliary Facilities Systems, 4.10%, 6/1/98 490,000
- --------------------------------------------------------------------------------
4,925,000
- --------------------------------------------------------------------------------
Connecticut - 1.2%
1,000,000 Connecticut State Health and Educational
Facilities Authority Revenue, (Edgehill Issue),
Series B, 3.85%, 7/1/04 1,000,000
- --------------------------------------------------------------------------------
Delaware - 0.8%
700,000 Wilmington Hospital Revenue, (Dates - Franciscan
Health System), Series A, 4.05%, 7/1/11 700,000
- --------------------------------------------------------------------------------
Florida - 7.1%
2,000,000 Broward County, Education Research and
Training Authority, (International Game and
Fish Assoc. Project), 3.70%, 8/1/04 2,000,000
3,000,000 Dade County, Apartment Revenue,
Series A, 3.95%, 10/1/09 3,000,000
1,000,000 St. Johns County Development Authority Revenue,
(VAW of America Project), 3.70%, 5/1/09 1,000,000
- --------------------------------------------------------------------------------
6,000,000
- --------------------------------------------------------------------------------
Hawaii - 4.5%
Hawaii State Housing Finance and Development
Corp. Revenue, (Rental Housing System):
3,200,000 Series A, 3.80%, 7/1/25 3,200,000
600,000 Series B, 3.80%, 7/1/25 600,000
- --------------------------------------------------------------------------------
3,800,000
- --------------------------------------------------------------------------------
Illinois - 3.5%
$ 649,070 Village of Franklin Park, (AM Castle and
Company Project), 3.90%, 6/1/17 $ 649,070
187,500 Village of Rosemont, (AM Castle and Company
Project), 3.90%, 9/1/17 187,500
2,100,000 Wood Dale Industrial Development Revenue,
(Nippon Express, Inc. Project), 3.85%, 6/1/00 2,100,000
- --------------------------------------------------------------------------------
2,936,570
- --------------------------------------------------------------------------------
Kansas - 1.8%
1,045,000 Shawnee Industrial Development Revenue,
(Shawnee Village Association Project),
3.75%, 12/1/09 1,045,000
500,000 Wichita Kansas XXV Revenue, (CSJ Health
Systems Project), 3.85%, 10/1/02 500,000
- --------------------------------------------------------------------------------
1,545,000
- --------------------------------------------------------------------------------
Kentucky - 1.2%
1,000,000 Mayfield Multi-City Lease Revenue, (League of
Cities Funding Transportation Project),
3.80%, 7/1/26 1,000,000
- --------------------------------------------------------------------------------
Louisiana - 3.3%
1,400,000 Louisiana Public Facilities Authorization
Revenue Industrial Development, (Gulf
Breeze Project), 3.85%, 12/1/14 1,400,000
1,385,000 Sulphur Industrial Development Revenue,
(La Quinta Inns Project), 3.70%, 12/1/04 1,385,000
- --------------------------------------------------------------------------------
2,785,000
- --------------------------------------------------------------------------------
Maryland - 0.2%
200,000 Frederick General Obligation, 3.95%, 8/1/11 200,000
- --------------------------------------------------------------------------------
Minnesota - 4.5%
2,600,000 Golden Valley Industrial Development Revenue,
(Unicare Homes Project), 3.95%, 9/1/14 2,600,000
1,200,000 Robbinsdale Industrial Development Revenue,
(Unicare Homes Project), 3.95%, 10/1/14 1,200,000
- --------------------------------------------------------------------------------
3,800,000
- --------------------------------------------------------------------------------
Missouri - 2.9%
973,000 Kansas City Industrial Development Authority,
(AM Castle and Company Project),
3.90%, 6/1/10 973,000
Missouri State Health and Educational Facilities
Authority Revenue:
200,000 (St. Louis University Project), 4.05%, 12/1/05 200,000
700,000 (Washington University Project), 4.10%, 9/1/30 700,000
600,000 West Plains Industrial Revenue Authority,
(West Plain Manor Project), 4.00%, 11/1/10 600,000
- --------------------------------------------------------------------------------
2,473,000
- --------------------------------------------------------------------------------
New York - 3.6%
2,200,000 New York State Dormitory Authority,
(St. Francis Center At The Knolls Revenue
Project), 4.15%, 7/1/23 2,200,000
900,000 Ontario County Industrial Development Authority,
(Eastman Kodak V Association Project),
4.05%, 8/1/15 900,000
- --------------------------------------------------------------------------------
3,100,000
- --------------------------------------------------------------------------------
See Notes to Schedules of Investments
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 21
<PAGE>
JANUS TAX-EXEMPT MONEY MARKET FUND October 31, 1997
- --------------------------------------------------------------------------------
Principal Amount Market Value
- --------------------------------------------------------------------------------
Ohio - 4.9%
$3,600,000 Cuyahoga County Hospital Revenue, (University
Hospitals - Cleveland), 4.20%, 1/1/16 $3,600,000
590,000 Ohio Industrial Development Revenue,
(AM Castle and Company Project),
3.90%, 12/1/06 590,000
- --------------------------------------------------------------------------------
4,190,000
- --------------------------------------------------------------------------------
Oklahoma - 3.4%
2,900,000 Tulsa Home Finance Authority, (Greenbriar
Project), Series B, 3.75%, 3/15/05 2,900,000
- --------------------------------------------------------------------------------
Oregon - 0.2%
Umatilla County Hospital Facilities Authority
Revenue, (Franciscan Health System):
100,000 Series A, 4.05%, 12/1/24 100,000
100,000 Series B, 4.05%, 12/1/24 100,000
- --------------------------------------------------------------------------------
200,000
- --------------------------------------------------------------------------------
Pennsylvania - 5.2%
1,100,000 Lehigh County General Purpose Authority
Revenue, (Lehigh Valley Hospital), Series A,
4.00%, 7/1/28 1,100,000
2,000,000 Northeastern Hospital and Education
Authority Revenue, (Allhealth Pooled
Financing Program), 3.75%, 7/1/26 2,000,000
1,300,000 Venango Industrial Development Authority,
(Pennzoil Company Project), Series A,
4.00%, 12/1/12 1,300,000
- --------------------------------------------------------------------------------
4,400,000
- --------------------------------------------------------------------------------
South Carolina - 1.7%
700,000 South Carolina Educational Facilities Authority
for Private Nonprofit Institutions, (Morris
College Project), 3.70%, 7/1/07 700,000
730,000 South Carolina Jobs Economic Development
Authority, (St. Francis Hospital Economic
Development Revenue Project), 4.05%, 7/1/22 730,000
- --------------------------------------------------------------------------------
1,430,000
- --------------------------------------------------------------------------------
Tennessee - 0.7%
200,000 Hamilton County Industrial Development
Revenue, (Komatsu America Manufacturing
Project), 3.85%, 11/1/05 200,000
200,000 Nashville Metropolitan Airport Authority
Facilities Revenue, (American Airlines
Project), Series A, 4.05%, 10/1/12 200,000
200,000 Sullivan County Tennessee Industrial
Development Board Pollution Control
Revenue, (Mead Corp. Project), 4.05%,
11/1/15 200,000
- --------------------------------------------------------------------------------
600,000
- --------------------------------------------------------------------------------
Texas - 4.7%
Grapevine Industrial Development Corp.,
(American Airlines), Variable Rate:
800,000 Series A-2, 4.05%, 12/1/24 800,000
300,000 Series B-1, 4.05%, 12/1/24 300,000
600,000 Series B-4, 4.05%, 12/1/24 600,000
Harris County Health Facilities and
Development Corp. Revenue, (St. Lukes
Episcopal Hospital):
900,000 Series A, 4.05%, 2/15/27 900,000
1,120,000 Series B, 4.05%, 2/15/27 1,120,000
200,000 Metropolitan Higher Education Authority,
(University of Dallas Project),
3.90%, 12/1/04 200,000
- --------------------------------------------------------------------------------
Texas - (continued)
$100,000 North Central Texas Health Facility Development
Corp. Revenue, (Presbyterian Medical Center),
Series D, 4.05%, 12/1/15 $ 100,000
- --------------------------------------------------------------------------------
4,020,000
- --------------------------------------------------------------------------------
Washington - 6.3%
2,925,000 Washington State Housing Multi-family
Mortgage Revenue, (Pacific First Federal),
Series B, 3.80%, 10/1/20 2,925,000
2,400,000 Washington State Nonprofit Housing Revenue,
(Emerald Heights Project), 4.15%, 1/1/21 2,400,000
- --------------------------------------------------------------------------------
5,325,000
- --------------------------------------------------------------------------------
Total Variable Rate Demand Notes (amortized cost $62,329,570) 62,329,570
- --------------------------------------------------------------------------------
Bond Anticipation Notes - 2.4%
1,000,000 Fall River, Massachusetts
4.25%, 8/14/98 1,002,632
1,000,000 Summit County, Ohio
Series A, 4.50%, 6/4/98 1,003,494
- --------------------------------------------------------------------------------
Total Bond Anticipation Notes (amortized cost $2,006,126) 2,006,126
- --------------------------------------------------------------------------------
General Obligation Notes - 17.0%
1,000,000 Conyers - Rickdale - Big Haynes, Impoundment
Authority Revenue, 3.68%, 12/31/97 1,000,111
840,000 Harris County Health Facilities and
Development Corp. Revenue, (School
Health Care Systems), Series B, 4.00%,
7/1/98 840,234
500,000 Kansas State Development Financial Authority
Revenue, (Dept. of Corrections El
Dorado), Series L, 4.80%, 2/1/98 501,214
1,600,000 Mattawan School District, 7.55%, 5/1/98 1,648,632
955,000 Mississippi State Board of Trustees of Higher
Learning, Series A, 3.95%, 11/15/98 955,000
Missouri State Health and Educational Facilities
Authority School District Advance
Funding Program:
705,000 (Camdenton School District),
Series C, 4.50%, 9/14/98 708,519
1,240,000 (Windsor C-1 School District),
Series O, 4.50%, 9/14/98 1,246,189
400,000 Navajo County University School District No. 10,
4.25%, 7/1/98 400,888
745,000 New Castle Area Hospital Authority Revenue,
(Jameson Memorial Hospital), 3.95%, 7/1/98 744,748
2,235,000 North Central Texas Health Facility Development
Corp. Revenue, (Presbyterian Healthcare),
Series A, 6.12%, 6/1/98 2,262,985
1,650,000 North Slope, Series G, 8.35%, 6/30/98 1,697,309
1,385,000 University of Southern Alabama Hospital and
Auxiliary Revenue Certificates, 3.85%, 8/1/98 1,385,000
1,000,000 Weslaco Health Facilities, (Knapp Medical
Center Project), Series B, 10.37%, 6/1/98 1,045,578
- --------------------------------------------------------------------------------
Total General Obligation Notes (amortized cost $14,436,407) 14,436,407
- --------------------------------------------------------------------------------
Put Bonds - 3.5%
1,000,000 Dove Valley, Colorado Metropolitan District,
Arapahoe County, Series B, 3.90%, 11/1/25 1,000,000
1,000,000 Interstate South Metropolitan District Colorado,
Series B, 3.75%, 11/1/14 1,000,000
985,000 Lombard, Illinois Multi-Family Housing,
(Clover Creek Apartments Project), 3.80%,
12/15/06 984,845
- --------------------------------------------------------------------------------
Total Put Bonds (amortized cost $2,984,845) 2,984,845
- --------------------------------------------------------------------------------
See Notes to Schedules of Investments
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 22
<PAGE>
JANUS TAX-EXEMPT MONEY MARKET FUND October 31, 1997
- --------------------------------------------------------------------------------
Principal Amount Market Value
- --------------------------------------------------------------------------------
Tax and Revenue Anticipation Notes - 2.4%
$1,000,000 Campbell County, Wyoming School District No. 1
Gillette, Tax Anticipation Warrants, 4.15%,
6/29/98 $ 1,001,581
1,000,000 New Mexico State Tax and Revenue Anticipation
Notes, 4.50%, 6/30/98 1,004,003
- --------------------------------------------------------------------------------
Total Tax and Revenue Anticipation Notes (amortized cost $2,005,584) 2,005,584
- --------------------------------------------------------------------------------
Total Investments (total cost $83,762,532) - 98.7% 83,762,532
- --------------------------------------------------------------------------------
Cash, Receivables and Other Assets, net of Liabilities - 1.3% 1,075,082
- --------------------------------------------------------------------------------
Net Assets - 100% $84,837,614
- --------------------------------------------------------------------------------
See Notes to Schedules of Investments
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 23
<PAGE>
STATEMENTS OF OPERATIONS - BOND FUNDS
<TABLE>
<CAPTION>
Janus Janus
Janus Janus Federal Short-Term
For the fiscal year ended October 31, 1997 Flexible Income High-Yield Tax-Exempt Bond
(all numbers in thousands) Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------
Investment Income:
<S> <C> <C> <C> <C>
Interest $50,554 $24,815 $3,028 $3,224
Dividends 1,671 352 -- 11
- ---------------------------------------------------------------------------------------------------------
52,225 25,167 3,028 3,235
- ---------------------------------------------------------------------------------------------------------
Expenses:
Advisory fees 3,910 1,994 321 315
Transfer agent fees and expenses 1,398 534 138 135
Registration fees 107 70 53 51
Postage and mailing expenses 98 33 15 16
Custodian fees 80 54 26 29
Printing expenses 79 25 11 12
Audit fees 25 17 10 5
Trustees' fees and expenses 6 3 -- --
Other expenses 39 31 18 18
- ---------------------------------------------------------------------------------------------------------
Total expenses 5,742 2,761 592 581
- ---------------------------------------------------------------------------------------------------------
Expense and fee offsets (94) (80) (7) (8)
- ---------------------------------------------------------------------------------------------------------
Net expenses 5,648 2,681 585 573
- ---------------------------------------------------------------------------------------------------------
Less: Excess expense reimbursement -- (19) (237) (258)
- ---------------------------------------------------------------------------------------------------------
5,648 2,662 348 315
- ---------------------------------------------------------------------------------------------------------
Net investment income 46,577 22,505 2,680 2,920
- ---------------------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain/(Loss) on Investments:
Net realized gain/(loss)
from securities transactions 17,479 16,365 517 484
Net realized gain/(loss)
from foreign currency 182 59 -- --
Net realized gain/(loss) from
futures or options contracts (2,786) -- (319) (77)
Change in net unrealized appreciation
or depreciation of investments 11,115 2,641 1,009 128
- ---------------------------------------------------------------------------------------------------------
Net gain/(loss) on investments 25,990 19,065 1,207 535
- ---------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations $72,567 $41,570 $3,887 $3,455
=========================================================================================================
</TABLE>
An Explanation of the Statement of Operations
This financial statement details the Funds' income, expenses, gains and
losses on securities and currency transactions and from appreciation or
depreciation of portfolio holdings. The first section in this statement, called
"Investment Income," reports the dividends earned from stocks and interest
earned from interest-bearing securities in the portfolio.
The next section reports the expenses and expense offsets incurred by the
Funds, including the advisory fee paid to the investment advisor, the transfer
agent fees, shareholder servicing expenses, printing and postage for mailing
statements, financial reports, and prospectuses to investors.
The last section lists the increase or decrease in the value of securities
held in the Funds' portfolios. Funds realize a gain (or loss) when they sell
their position in a particular security. Unrealized gain (or loss) refers to the
change in net appreciation or depreciation of the Funds' portfolios during the
period. This figure is affected by both changes in the market value of portfolio
holdings and by gains (or losses) realized during the reporting period.
See Notes to Financial Statements
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 24
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES - BOND FUNDS
<TABLE>
<CAPTION>
Janus Janus
As of October 31, 1997 Janus Janus Federal Short-Term
(all numbers in thousands Flexible Income High-Yield Tax-Exempt Bond
except net asset value per share) Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------
Assets:
<S> <C> <C> <C> <C>
Investments at cost $670,618 $272,410 $60,499 $56,269
======================================================================================================
Investments at value $694,281 $278,615 $61,965 $56,677
Cash 4,194 1,511 89 88
Receivables:
Investments sold 29,747 36,678 8,122 --
Fund shares sold 1,555 996 75 402
Dividends 44 44 -- --
Interest 14,054 5,616 975 1,128
Due from advisor -- -- -- 50
Other assets -- 1 24 --
- ------------------------------------------------------------------------------------------------------
Total Assets 743,875 323,461 71,250 58,345
- ------------------------------------------------------------------------------------------------------
Liabilities:
Payables:
Investments purchased 14,075 15,974 9,053 --
Fund shares repurchased 1,800 5,628 40 367
Dividends 305 120 21 --
Advisory fee 361 203 31 31
Transfer agent fee 118 54 13 13
Accrued expenses 115 60 37 26
- ------------------------------------------------------------------------------------------------------
Total Liabilities 16,774 22,039 9,195 437
- ------------------------------------------------------------------------------------------------------
Net Assets $727,101 $301,422 $62,055 $57,908
Shares Outstanding, $0.01 Par Value
(unlimited shares authorized) 72,706 25,471 8,755 19,980
======================================================================================================
Net Asset Value Per Share $10.00 $11.83 $7.09 $2.90
======================================================================================================
</TABLE>
An Explanation of the Statement of Assets and Liabilities
This financial statement is often referred to as the "balance sheet." It
lists the assets and liabilities of the Fund on the last day of the fiscal
period.
The Funds' assets are calculated by adding the value of the securities
owned, the receivable for securities sold but not yet settled, the receivable
for dividends declared on stocks owned but not yet received, and the receivable
for Fund shares sold to investors but not yet settled. The Funds' liabilities
include payables for securities purchased but not yet settled, fund shares
redeemed but not yet paid, and expenses owed but not yet paid.
The last line of this schedule reports the Funds' net asset value (NAV) per
share on the last day of the fiscal period. The NAV is calculated by dividing
the Funds' net assets (assets minus liabilities) by the number of shares
outstanding.
See Notes to Financial Statements
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 25
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS - BOND FUNDS
<TABLE>
<CAPTION>
For the fiscal year or Janus Janus Janus Janus
period ended October 31 Flexible Income High-Yield Federal Tax-Exempt Short-Term Bond
(all numbers in thousands) Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------------
1997 1996 1997 1996(1) 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
Operations:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment income $46,577 $45,864 $22,505 $6,672 $2,680 $1,883 $2,920 $2,353
Net realized gain from
investment transactions 14,875 12,178 16,424 2,395 198 260 407 138
Change in unrealized net appreciation
or depreciation of investments 11,115 (7,554) 2,641 3,565 1,009 (110) 128 118
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 72,567 50,488 41,570 12,632 3,887 2,033 3,455 2,609
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends and Distributions
to Shareholders:
Net investment income* (46,546) (45,865) (22,392) (6,672) (2,680) (1,884) (2,920) (2,352)
Net realized gain from
investment transactions (1,192) -- (2,396) -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net decrease from
dividends and distributions (47,738) (45,865) (24,788) (6,672) (2,680) (1,884) (2,920) (2,352)
- ---------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Shares sold 350,811 313,773 446,508 272,508 45,594 26,324 60,336 27,920
Reinvested dividends and distributions 40,664 38,575 22,048 5,896 2,247 1,553 2,720 2,169
Shares repurchased (292,858) (333,675) (394,849) (73,431) (31,851) (15,761) (46,467) (37,679)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) from
capital share transactions 98,617 18,673 73,707 204,973 15,990 12,116 16,589 (7,590)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets 123,446 23,296 90,489 210,933 17,197 12,265 17,124 (7,333)
Net Assets:
Beginning of period 603,655 580,359 210,933 -- 44,858 32,593 40,784 48,117
- ---------------------------------------------------------------------------------------------------------------------------------
End of Period $727,101 $603,655 $301,422 $210,933 $62,055 $44,858 $57,908 $40,784
=================================================================================================================================
Net Assets consist of:
Capital (par value and paid-in surplus)* $687,691 $589,076 $278,679 $204,973 $62,041 $46,050 $60,328 $43,738
Undistributed net investment income* 610 394 142 -- -- -- 1 2
Undistributed net realized
gain/(loss) from investments* 15,135 1,635 16,395 2,395 (1,451) (1,648) (2,829) (3,236)
Unrealized appreciation/
(depreciation) of investments 23,665 12,550 6,206 3,565 1,465 456 408 280
- ---------------------------------------------------------------------------------------------------------------------------------
$727,101 $603,655 $301,422 $210,933 $62,055 $44,858 $57,908 $40,784
=================================================================================================================================
Transactions in Fund Shares:
Shares sold 36,058 32,701 39,057 25,145 6,489 3,784 20,891 9,842
Reinvested distributions 4,173 4,031 1,928 538 320 223 942 764
- ---------------------------------------------------------------------------------------------------------------------------------
Total 40,231 36,732 40,985 25,683 6,809 4,007 21,833 10,606
Shares repurchased (30,105) (34,947) (34,479) (6,718) (4,535) (2,263) (16,092) (13,292)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) 10,126 1,785 6,506 18,965 2,274 1,744 5,741 (2,686)
- ---------------------------------------------------------------------------------------------------------------------------------
Shares outstanding beginning of period 62,580 60,795 18,965 -- 6,481 4,737 14,239 16,925
Shares outstanding end of period 72,706 62,580 25,471 18,965 8,755 6,481 19,980 14,239
=================================================================================================================================
Purchases and Sales of
Investment Securities:
(excluding Short-Term Securities)
Purchases of Securities $1,015,048 $1,062,764 $990,668 $431,286 $160,242 $87,631 $57,906 $118,608
Proceeds from Sales of Securities 976,235 1,075,417 931,662 239,819 150,332 79,890 48,107 127,584
Purchases of Long-Term
U.S. Government Obligations 302,415 147,498 24,923 1,115 10,028 -- 17,687 54,851
Proceeds from Sales of Long-Term
U.S. Government Obligations 260,655 155,967 25,205 1,141 7,045 -- 10,416 60,549
=================================================================================================================================
</TABLE>
(1) Fiscal period December 29, 1995 (inception) to October 31, 1996
* See Note 3 in Notes to Financial Statements
An Explanation of the Statement of Changes in Net Assets
This financial statement reports the increase or decrease in the Funds' net
assets during the reporting period. Changes in the Funds' net assets are
attributable to investment operations, dividends, distributions, and capital
share transactions. This schedule is of importance to investors because it shows
exactly what caused the Funds' asset size to change during the period. Investors
can use this information to determine if the Funds' growth was a result of
operations or an increase in the number of shares being purchased.
The first section summarizes the information from the Statement of
Operations regarding changes in net assets due to the Funds' investment
performance. The Funds' net assets will also change as a result of dividend and
capital gain distributions to investors. If investors receive their dividends in
cash, money is taken out of the Fund to pay the distribution. If investors
reinvest their dividends, the Funds' net assets will not be affected. If you
compare each Fund's "Net decrease from dividends and distributions" to the
"Reinvested dividends and distributions," you'll notice that dividend
distributions had little effect on each Fund's net assets. This is because the
majority of Janus investors reinvest their distributions.
The reinvestment of dividends is included under "Capital Share
Transactions." "Capital Shares" refers to the money investors contribute to the
Fund through purchases or withdraw via redemptions. The Fund's net assets will
increase and decrease in value as investors purchase and redeem shares from the
Fund.
The section titled "Net Assets Consist of" breaks down the components of
the Funds' net assets. Since funds must distribute substantially all earnings,
you'll notice that a significant portion of net assets is shareholder capital.
See Notes to Financial Statements
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 26
<PAGE>
FINANCIAL HIGHLIGHTS - BOND FUNDS
<TABLE>
<CAPTION>
For a share outstanding throughout each fiscal year Janus Flexible Income Fund
or period ended October 31 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.65 $9.55 $8.96 $10.03 $9.26
- ------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .69 .73 .72 .74 .77
Net gains or (losses) on securities
(both realized and unrealized) .37 .10 .59 (.86) .79
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.06 .83 1.31 (.12) 1.56
- ------------------------------------------------------------------------------------------------------------------
Less distributions
Dividends (from net investment income) (.69) (.73) (.72) (.72) (.77)
Distributions (from capital gains) (.02) -- -- (.23) (.02)
- ------------------------------------------------------------------------------------------------------------------
Total distributions (.71) (.73) (.72) (.95) (.79)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.00 $9.65 $9.55 $8.96 $10.03
==================================================================================================================
Total return* 11.48% 9.01% 15.35% (1.26%) 17.48%
==================================================================================================================
Net assets, end of period (in thousands) $727,101 $603,655 $580,359 $377,345 $473,116
Average net assets for the period
(in thousands) $656,422 $603,694 $450,001 $428,962 $337,568
Ratio of gross expenses to
average net assets** 0.87% 0.88% 0.96% NA NA
Ratio of net expenses to
average net assets** 0.86% 0.87% 0.96% 0.93% 1.00%(3)
Ratio of net investment income
to average net assets** 7.10% 7.60% 7.91% 7.75% 7.96%
Portfolio turnover rate** 207% 214% 250% 137% 201%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
For a share outstanding throughout each fiscal year Janus Federal Tax-Exempt Fund
or period ended October 31 1997 1996 1995 1994 1993(1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $6.92 $6.88 $6.45 $7.30 $7.00
- ------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .35 .36 .36 .36 .14
Net gains or (losses) on securities
(both realized and unrealized) .17 .04 .43 (.83) .30
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations .52 .40 .79 (.47) .44
- ------------------------------------------------------------------------------------------------------------------
Less distributions
Dividends (from net investment income) (.35) (.36) (.36) (.36) (.14)
Distributions (from capital gains) -- -- -- (.02) --
- ------------------------------------------------------------------------------------------------------------------
Total distributions (.35) (.36) (.36) (.38) (.14)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $7.09 $6.92 $6.88 $6.45 $7.30
==================================================================================================================
Total return* 7.72% 5.94% 12.60% (6.62%) 6.33%*
==================================================================================================================
Net assets, end of period
(in thousands) $62,055 $44,858 $32,593 $26,464 $27,331
Average net assets for the period
(in thousands) $53,574 $36,312 $29,318 $28,384 $16,038
Ratio of gross expenses to
average net assets** 0.66%(4) 0.68%(4) 0.70%(4) NA NA
Ratio of net expenses to
average net assets** 0.65% 0.65% 0.65% 0.65% 0.75%
Ratio of net investment
income to average net assets** 5.00% 5.18% 5.43% 5.20% 4.58%
Portfolio turnover rate** 304% 225% 164% 160% 124%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
For a share outstanding throughout each fiscal year Janus High-Yield Fund
or period ended October 31 1997 1996(2)
- --------------------------------------------------------------------------------
Net asset value, beginning of period $11.12 $10.00
- --------------------------------------------------------------------------------
Income from investment operations
Net investment income .97 .80
Net gains or (losses) on securities
(both realized and unrealized) .82 1.12
- --------------------------------------------------------------------------------
Total from investment operations 1.79 1.92
- --------------------------------------------------------------------------------
Less distributions
Dividends (from net investment income) (.97) (.80)
Distributions (from capital gains) (.11) --
- --------------------------------------------------------------------------------
Total distributions (1.08) (.80)
- --------------------------------------------------------------------------------
Net asset value, end of period $11.83 $11.12
================================================================================
Total return* 16.94% 19.71%
================================================================================
Net assets, end of period
(in thousands) $301,422 $210,933
Average net assets for the period
(in thousands) $266,213 $88,126
Ratio of gross expenses to
average net assets** 1.03%(5) 1.01%(5)
Ratio of net expenses to
average net assets** 1.00% 1.00%
Ratio of net investment income
to average net assets** 8.45% 9.00%
Portfolio turnover rate** 404% 324%
- --------------------------------------------------------------------------------
(1) Fiscal period from May 3, 1993 (inception) to October 31, 1993
(2) Fiscal period from December 29, 1995 (inception) to October 31, 1996
(3) The ratio was 1.01% in 1993 before voluntary waiver of certain fees incurred
by the Fund.
(4) The ratio was 1.11% in 1997, 1.14% in 1996, 1.31% in 1995, 1.41% in 1994 and
1.60% in 1993 before voluntary waiver of certain fees incurred by the Fund.
(5) The ratio was 1.04% in 1997 and 1.18% in 1996 before voluntary waiver of
certain fees incurred by the Fund.
* Total return not annualized for periods of less than one year
** Annualized for periods less than one year
NA - Disclosure not required for prior periods
See Notes to Financial Statements
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 27
<PAGE>
FINANCIAL HIGHLIGHTS - BOND FUNDS
<TABLE>
<CAPTION>
For a share outstanding throughout each fiscal year Janus Short-Term Bond Fund
or period ended October 31 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $2.86 $2.84 $2.87 $3.02 $2.98
- ------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .17 .16 .18 .18 .14
Net gains or (losses) on securities
(both realized and unrealized) .04 .02 (.03) (.15) .04
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations .21 .18 .15 .03 .18
- ------------------------------------------------------------------------------------------------------------------
Less distributions
Dividends (from net investment income) (.17) (.16) (.18) (.17) (.14)
Distributions (from capital gains) -- -- -- (.01) --
- ------------------------------------------------------------------------------------------------------------------
Total distributions (.17) (.16) (.18) (.18) (.14)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $2.90 $2.86 $2.84 $2.87 $3.02
==================================================================================================================
Total return* 7.70% 6.49% 5.55% 1.26% 6.17%
==================================================================================================================
Net assets, end of period
(in thousands) $57,908 $40,784 $48,117 $54,285 $76,096
Average net assets for the period
(in thousands) $48,421 $42,203 $47,383 $59,584 $36,794
Ratio of gross expenses to
average net assets** 0.67%(1) 0.67%(1) 0.66%(1) NA NA
Ratio of net expenses to
average net assets** 0.65% 0.65% 0.65% 0.65%(1) 0.83%(1)
Ratio of net investment income
to average net assets** 6.03% 5.57% 6.67% 6.08% 4.86%
Portfolio turnover rate** 133% 486% 337% 346% 372%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The ratio was 1.20% in 1997, 1.23% in 1996, 1.23% in 1995, 1.15% in 1994,
and 1.40% in 1993 before voluntary waiver of certain fees incurred by the
Fund.
* Total return not annualized for periods of less than one year
** Annualized for periods less than one year
NA - Disclosure not required for prior periods
An Explanation of the Financial Highlights
This schedule provides a per-share breakdown of the components that affect
the Funds' NAV for the current and past reporting periods. Not only does this
table provide you with total return, it also reports total distributions, asset
size, expense ratios, and portfolio turnover rate.
The first line in the table reflects the Funds' NAV per share at the
beginning of the fiscal period. The next line reports the Funds' net investment
income per share, which is comprised of dividends and interest income earned on
securities held by the Fund. Following is the total of gains, realized and
unrealized. Dividends and distributions are then subtracted to arrive at the NAV
per share at the end of the fiscal period.
Also included in the Financial Highlights is the Funds' expense ratio, or
the percentage of net assets that was used to cover operating expenses during
the period. Expense ratios vary across the Funds for a number of reasons,
including the differences in management fees, average shareholder account size,
the frequency of dividend payments, and the extent of foreign investments, which
entail greater transaction costs.
The Funds' expenses may be reduced through expense reduction arrangements.
Those arrangements include the use of broker commissions and cash balances
earning interest or balance credits with the Funds' custodian and transfer agent
bank accounts. The Statements of Operations reflect the total expenses before
any offset, the amount of offset, and the net expenses. The expense ratios
listed in the Financial Highlights reflect total expenses both prior to any
expense offset and after the offsets, along with any expense reimbursements.
Expense ratios prior to any expense offset are part of disclosure
requirements imposed in 1996. Years prior to 1995 do not reflect this
information.
The next line reports the ratio of net investment income, which is the
income earned divided by the average net assets of the Funds during the
reporting period. Don't confuse this ratio with a Fund's yield. The net
investment income ratio is not a true measure of a Fund's yield because it
doesn't take into account the dividends distributed to the Fund's investors.
The next ratio provided in this table is the portfolio turnover rate, which
measures the amount of buying and selling activity in the Funds' portfolios.
Portfolio turnover is affected by market conditions, changes in the size of a
Fund, the nature of the Fund's investments, and the investment style of the
portfolio manager. A 100% rate implies that an amount equal to the value of the
entire portfolio is turned over in a year; a 50% rate means that an amount equal
to the value of half the portfolio is traded in a year; and a 200% rate would
mean that an amount equal to the value of the portfolio is sold in an average of
six months.
See Notes to Financial Statements
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 28
<PAGE>
STATEMENTS OF OPERATIONS - MONEY MARKET FUNDS
<TABLE>
<CAPTION>
For the fiscal year or Janus Janus Government Janus Tax-Exempt
period ended October 31, 1997 Money Market Money Market Money Market
(all numbers in thousands) Fund Fund Fund
- ------------------------------------------------------------------------------------------
Investment Income:
<S> <C> <C> <C>
Interest $195,066 $10,073 $2,982
- ------------------------------------------------------------------------------------------
195,066 10,073 2,982
- ------------------------------------------------------------------------------------------
Expenses:
Advisory Fee for Investor Shares 883 123 76
Advisory Fee for Institutional Shares 2,546 57 3
Advisory Fee for Service Shares* 1 1 --
Administrative Fee for Investor Shares 4,415 616 380
Administrative Fee for Institutional Shares 1,273 28 2
Adminstrative Fee for Service Shares* -- 1 --
Service Fee for Service Shares 2 3 --
Audit Fees 15 8 8
Trustees' Fees and Expenses 32 2 1
Interest Expenses -- -- 1
- ------------------------------------------------------------------------------------------
Total Expenses 9,167 839 471
- ------------------------------------------------------------------------------------------
Net Investment Income: 185,899 9,234 2,511
- ------------------------------------------------------------------------------------------
Net Realized Gain/(Loss) on Investments:
Net realized gain/(loss)
from investment transactions 98 8 (2)
- ------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations $185,997 $9,242 $2,509
==========================================================================================
</TABLE>
* Period November 22, 1996 (inception) to October 31, 1997
STATEMENTS OF ASSETS AND LIABILITIES - MONEY MARKET FUNDS
<TABLE>
<CAPTION>
As of October 31, 1997 Janus Janus Government Janus Tax-Exempt
(all numbers in thousands Money Market Money Market Money Market
except net asset value) Fund Fund Fund
- ----------------------------------------------------------------------------------------------
Assets:
<S> <C> <C> <C>
Investments at amortized cost $3,992,906 $172,798 $83,763
Cash 16 137 68
Receivables:
Investments Sold -- -- 1,000
Fund Shares Sold 5,977 1,006 1,623
Interest 24,984 368 638
- ----------------------------------------------------------------------------------------------
Total Assets 4,023,883 174,309 87,092
- ----------------------------------------------------------------------------------------------
Liabilities:
Payables
Investments Purchased 104,346 -- --
Fund Shares Repurchased 93,952 5,661 2,208
Dividends and Distributions 10,663 37 1
Advisory Fee 379 14 7
Administrative Fee 579 55 32
Service Fees 2 -- --
Audit Fee 11 5 5
Trustees' Expenses 2 -- --
Interest Expenses -- -- 1
- ----------------------------------------------------------------------------------------------
Total Liabilities 209,934 5,772 2,254
- ----------------------------------------------------------------------------------------------
Total Net Assets $3,813,949 $168,537 $84,838
Shares Outstanding, $0.01 Par Value
(unlimited shares authorized) 3,813,949 168,537 84,838
- ----------------------------------------------------------------------------------------------
Net Asset Value Per Share $1.00 $1.00 $1.00
==============================================================================================
</TABLE>
See Notes to Financial Statements
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 29
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS - MONEY MARKET FUNDS
<TABLE>
<CAPTION>
For the fiscal year or Janus Janus Government Janus Tax-Exempt
period ended October 31 Money Market Money Market Money Market
(all numbers in thousands) Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------
1997(1) 1996 1997(1) 1996 1997(1) 1996
- -----------------------------------------------------------------------------------------------------------------
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $185,899 $81,188 $9,234 $8,358 $2,511 $2,279
Net realized gain/(loss)
from investment transactions 98 99 8 9 (2) (1)
- -----------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in
net assets resulting from operations 185,997 81,287 9,242 8,367 2,509 2,278
- -----------------------------------------------------------------------------------------------------------------
Dividends and Distributions to Shareholders:
Net investment income:
Investor Shares (44,924) (33,875) (6,112) (5,507) (2,384) (2,211)
Institutional Shares (140,928) (47,313) (3,063) (2,851) (125) (67)
Service Shares (47) -- (60) -- -- --
Net realized gain/(loss)
from investment transactions:
Investor Shares (22) (39) (5) (6) -- --
Institutional Shares (76) (60) (2) (3) -- --
Service Shares -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------
Net decrease from
dividends and distributions (185,997) (81,287) (9,242) (8,367) (2,509) (2,278)
- -----------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Shares sold:
Investor Shares 4,205,232 1,457,473 250,916 121,998 244,419 89,300
Institutional Shares 57,798,535 24,946,671 671,494 648,284 37,249 38,832
Service Shares 17,775 -- 2,557 -- 10 --
Reinvested dividends and distributions:
Investor Shares 42,784 32,696 5,901 5,320 2,281 2,141
Institutional Shares 32,270 15,684 2,569 2,267 113 43
Service Shares 47 -- 32 -- -- --
Shares repurchased:
Investor Shares (3,989,256) (1,359,501) (242,091) (129,217) (240,069) (84,282)
Institutional Shares (56,765,454) (23,561,697) (697,778) (635,225) (35,750) (48,120)
Service Shares (7,481) -- (1,961) -- -- --
- -----------------------------------------------------------------------------------------------------------------
Net increase/(decrease) from
capital share transactions 1,334,452 1,531,326 (8,361) 13,427 8,253 (2,086)
- -----------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets 1,334,452 1,531,326 (8,361) 13,427 8,253 (2,086)
Net Assets beginning of period 2,479,497 948,171 176,898 163,471 76,585 78,671
- -----------------------------------------------------------------------------------------------------------------
Net Assets end of period $3,813,949 $2,479,497 $168,537 $176,898 $84,838 $76,585
=================================================================================================================
Net Assets consist of:
Capital (par value and paid-in surplus) $3,813,949 $2,479,497 $168,537 $176,898 $84,838 $76,585
Undistributed net realized
gain/(loss) from investments -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------
$3,813,949 $2,479,497 $168,537 $176,898 $84,838 $76,585
=================================================================================================================
Transactions in Fund Shares -
Investor Shares
Shares Sold 4,205,232 1,457,473 250,916 121,998 244,419 89,300
Reinvested dividends and distributions 42,784 32,696 5,901 5,320 2,281 2,141
- -----------------------------------------------------------------------------------------------------------------
Total 4,248,016 1,490,169 256,817 127,318 246,700 91,441
Shares repurchased (3,989,256) (1,359,501) (242,091) (129,217) (240,069) (84,282)
- -----------------------------------------------------------------------------------------------------------------
Net increase(decrease) in fund shares 258,760 130,668 14,726 (1,899) 6,631 7,159
- -----------------------------------------------------------------------------------------------------------------
Shares outstanding at beginning of period 773,887 643,219 117,408 119,307 74,638 67,479
Shares outstanding at end of period 1,032,647 773,887 132,134 117,408 81,269 74,638
=================================================================================================================
Transactions in Fund Shares -
Institutional Shares
Shares Sold 57,798,535 24,946,671 671,494 648,284 37,249 38,832
Reinvested dividends and distributions 32,270 15,684 2,569 2,267 113 43
- -----------------------------------------------------------------------------------------------------------------
Total 57,830,805 24,962,355 674,063 650,551 37,362 38,875
Shares repurchased (56,765,454) (23,561,697) (697,778) (635,225) (35,750) (48,120)
- -----------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in fund shares 1,065,351 1,400,658 (23,715) 15,326 1,612 (9,245)
- -----------------------------------------------------------------------------------------------------------------
Shares outstanding at
beginning of period 1,705,610 304,952 59,490 44,164 1,947 11,192
Shares outstanding at
end of period 2,770,961 1,705,610 35,775 59,490 3,559 1,947
=================================================================================================================
Transactions in Fund Shares -
Service Shares
Shares Sold 17,775 -- 2,557 -- 10 --
Reinvested dividends and distributions 47 -- 32 -- -- --
- -----------------------------------------------------------------------------------------------------------------
Total 17,822 -- 2,589 -- 10 --
Shares repurchased (7,481) -- (1,961) -- -- --
- -----------------------------------------------------------------------------------------------------------------
Net increase(decrease) in fund shares 10,341 -- 628 -- 10 --
- -----------------------------------------------------------------------------------------------------------------
Shares outstanding at beginning of period -- -- -- -- -- --
Shares outstanding at end of period 10,341 -- 628 -- 10 --
=================================================================================================================
</TABLE>
(1) Fiscal period November 22, 1996 (inception) to October 31, 1997 for Service
Shares
See Notes to Financial Statements
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 30
<PAGE>
FINANCIAL HIGHLIGHTS - MONEY MARKET FUNDS
<TABLE>
<CAPTION>
Janus Janus Government
For a share outstanding throughout Money Market Money Market
each fiscal year or period ended October 31 Fund Fund
- -------------------------------------------------------------------------------------------------------------------------
Investor Shares 1997 1996 1995(1) 1997 1996 1995(1)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value at
<S> <C> <C> <C> <C> <C> <C>
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .05 .05 .04 .05 .05 .04
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations .05 .05 .04 .05 .05 .04
- -------------------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions:
Dividends (from net investment income) (.05) (.05) (.04) (.05) (.05) (.04)
- -------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (.05) (.05) (.04) (.05) (.05) (.04)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=========================================================================================================================
Total return* 5.23% 5.13% 3.95% 5.11% 5.03% 3.90%
=========================================================================================================================
Net assets at end of period
(in thousands) $1,032,647 $773,887 $643,219 $132,133 $117,408 $199,307
Average net assets for
the period (in thousands) $883,052 $676,334 $461,311 $123,193 $112,059 $87,906
Ratio of expenses to
average net assets** 0.60%(4) 0.60%(4) 0.60%(4) 0.60%(4) 0.60%(4) 0.60%(4)
Ratio of net investment income
to average net assets** 5.09% 5.01% 5.56% 5.42% 4.91% 5.40%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Janus Tax-Exempt
For a share outstanding throughout Money Market
each fiscal year or period ended October 31 Fund
- -----------------------------------------------------------------------------
Investor Shares 1997 1996 1995(1)
- -----------------------------------------------------------------------------
Net asset value at
beginning of period $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------
Income from investment operations:
Net investment income .03 .03 .02
- -----------------------------------------------------------------------------
Total from investment operations .03 .03 .02
- -----------------------------------------------------------------------------
Less Dividends and Distributions:
Dividends (from net investment income) (.03) (.03) (.02)
- -----------------------------------------------------------------------------
Total dividends and distributions (.03) (.03) (.02)
- -----------------------------------------------------------------------------
Net asset value at end of period $1.00 $1.00 $1.00
=============================================================================
Total return* 3.20% 3.27% 2.40%
=============================================================================
Net assets at end of period
(in thousands) $81,268 $74,638 $67,479
Average net assets for
the period (in thousands) $75,929 $68,695 $57,366
Ratio of expenses to
average net assets** 0.60%(4) 0.60%(4) 0.60%(4)
Ratio of net investment income
to average net assets** 3.14% 3.22% 3.38%
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Janus Janus Government
For a share outstanding throughout Money Market Money Market
each fiscal year or period ended October 31 Fund Fund
- ----------------------------------------------------------------------------------------------------------------------
Institutional Shares 1997 1996 1995(2) 1997 1996 1995(2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .06 .05 .03 .05 .05 .03
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations .06 .05 .03 .05 .05 .03
- ----------------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions:
Dividends (from net investment income) (.06) (.05) (.03) (.05) (.05) (.03)
- ----------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (.06) (.05) (.03) (.05) (.05) (.03)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======================================================================================================================
Total return* 5.71% 5.61% 3.25% 5.58% 5.50% 3.20%
======================================================================================================================
Net assets at end of period
(in thousands) $2,770,961 $1,705,610 $304,952 $35,776 $59,490 $44,164
Average net assets for
the period (in thousands) $2,545,294 $874,431 $202,427 $56,801 $53,398 $24,748
Ratio of expenses to
average net assets** 0.15%(5) 0.15%(5) 0.15%(5) 0.15%(5) 0.15%(5) 0.15%(5)
Ratio of net investment
income to average net assets** 5.54% 5.41% 5.86% 6.04% 5.34% 5.75%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Janus Tax-Exempt
For a share outstanding throughout Money Market
each fiscal year or period ended October 31 Fund
- --------------------------------------------------------------------------------
Institutional Shares 1997 1996 1995(2)
- --------------------------------------------------------------------------------
Net asset value at
beginning of period $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income .04 .04 .02
- --------------------------------------------------------------------------------
Total from investment operations .04 .04 .02
- --------------------------------------------------------------------------------
Less Dividends and Distributions:
Dividends (from net investment income) (.04) (.04) (.02)
- --------------------------------------------------------------------------------
Total dividends and distributions (.04) (.04) (.02)
- --------------------------------------------------------------------------------
Net asset value at end of period $1.00 $1.00 $1.00
================================================================================
Total return* 3.67% 3.74% 2.09%
================================================================================
Net assets at end of period
(in thousands) $3,560 $1,947 $11,192
Average net assets for
the period (in thousands) $3,466 $1,754 $1,115
Ratio of expenses to
average net assets** 0.15%(5) 0.15%(5) 0.15%(5)
Ratio of net investment
income to average net assets** 3.94% 3.82% 3.82%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Janus Janus Government Janus Tax-Exempt
For a share outstanding throughout Money Market Money Market Money Market
each fiscal year or period ended October 31 Fund Fund Fund
- -----------------------------------------------------------------------------------------------
Service Shares 1997(3) 1997(3) 1997(3)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .05 .05 .03
- -----------------------------------------------------------------------------------------------
Total from investment operations .05 .05 .03
- -----------------------------------------------------------------------------------------------
Less Dividends and Distributions:
Dividends (from net investment income) (.05) (.05) (.03)
- -----------------------------------------------------------------------------------------------
Total dividends and distributions (.05) (.05) (.03)
- -----------------------------------------------------------------------------------------------
Net asset value at end of period $1.00 $1.00 $1.00
===============================================================================================
Total return* 5.14% 5.01% 3.22%
===============================================================================================
Net assets at end of period
(in thousands) $10,341 $628 $10
Average net assets for the
period (in thousands) $913 $1,141 $10
Ratio of expenses to
average net assets** 0.40%(6) 0.40%(6) 0.40%(6)
Ratio of net investment income
to average net assets** 5.02% 5.23% 3.17%
- -----------------------------------------------------------------------------------------------
</TABLE>
* Total return is not annualized for per iods of less than one year
** Annualized
(1) Fiscal period February 15, 1995 (inception) to October 31, 1995
(2) Fiscal period April 17, 1995 (inception) to October 31, 1995
(3) Fiscal period November 22, 1996 (inception) to October 31, 1997
(4) The ratio was .70% before voluntary reduction of fees.
(5) The ratio was .35% before voluntary reduction of fees.
(6) The ratio was .60% before voluntary reduction of fees.
See Notes to Financial Statements
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 31
<PAGE>
NOTES TO SCHEDULES OF INVESTMENTS
Adjustable Rate Preferred Stock Dividend Rates are as of 10/31/97.
* Non-income-producing security
** A portion of this security has been segregated by the custodian to cover
margin or segregation requirements on open futures contracts and/or forward
currency contracts.
+ Securities are registered pursuant to Rule 144A and may be deemed to be
restricted for resale.
1) Variable Rate Notes. The interest rate, which is based on specific, or an
index of, market interest rates, is subject to change. Rates in the security
description are as of October 31, 1997.
2) Money Market Funds may hold securities with stated maturities of greater than
one year when those securities have features which allow the Fund to "put"
back the security to the issuer or to a third party within a year of
acquisition. The maturity date shown in the security descriptions are the
stated maturity dates.
3) Repurchase Agreements held by the Fund are fully collateralized and such
collateral is in the possession of the Fund's custodian. The collateral is
evaluated daily to ensure its market value exceeds the current market value
of the repurchase agreements, including accrued interest. In the event of
default on the obligation to repurchase, the Fund has the right to liquidate
the collateral and apply the proceeds in satisfaction of the obligation. In
the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral or proceeds may be subject to
legal proceedings.
CAD Canadian Dollar
DEM German Deutschemark
NOTES TO FINANCIAL STATEMENTS
The following section describes the organization and significant accounting
policies of the Funds and provides more detailed information about the schedules
and tables that appear throughout this report. In addition, the Notes explain
how the Funds operate and the methods used in preparing and presenting this
report.
1. Organization and Significant Accounting Policies
Janus Investment Fund (the "Trust") is registered under the Investment
Company Act of 1940 (the "1940 Act") as a no-load, open-end management
investment company. Four series of shares (the "Bond Funds") included in this
report invest primarily in income-producing securities, and three series of
shares (the "Money Market Funds") invest exclusively in high-quality money
market instruments. Each of the Money Market Funds offers three classes of
shares.
"Investor Shares" are available to the general public and "Institutional
Shares" are available only to investors that meet the $250,000 minimum account
size, and allow wire transactions only.
Effective November 22, 1996, Janus Money Market Fund, Janus Government Money
Market Fund, and Janus Tax-Exempt Money Market Fund began offering a new class
of shares "Service Shares." Service Shares are available exclusively through
banks and other financial institutions.
The following policies have been consistently followed by the Funds and are
in conformity with accounting principles generally accepted in the investment
company industry.
Investment Valuation
Securities are valued at the closing price for securities traded on a
principal exchange (U.S. or foreign) and on the NASDAQ National Market.
Securities traded on over-the-counter markets and listed securities for which no
sales are reported are valued at the latest bid price (or yield equivalent
thereof) obtained from one or more dealers making a market for such securities
or by a pricing service approved by the Funds' Trustees. Short-term investments
maturing within 60 days for the Bond Funds and all money market securities in
the Money Market Funds are valued at amortized cost, which approximates market
value. Foreign securities are converted to U.S. dollars using exchange rates at
the close of the New York Stock Exchange. When market quotations are not readily
available, securities are valued at fair value as determined in good faith by
the Funds' Trustees.
Investment Transactions and Investment Income
Investment transactions are accounted for as of the date purchased or sold.
Dividend income is recorded on the ex-dividend date. Certain dividends from
foreign securities will be recorded as soon as the Trust is informed of the
dividend if such information is obtained subsequent to the ex-dividend date.
Interest income is recorded on the accrual basis and includes amortization of
discounts and premiums. Gains and losses are determined on the identified cost
basis, which is the same basis used for federal income tax purposes.
Forward Currency Transactions and Futures Contracts
The Funds enter into forward currency contracts in order to reduce their
exposure to changes in foreign currency exchange rates on their foreign
portfolio holdings and to lock in the U.S. dollar cost of firm purchase and sale
commitments for securities denominated in foreign currencies. A forward currency
contract is a commitment to purchase or sell a foreign currency at a future date
at a negotiated forward rate. The gain or loss arising from the difference
between the U.S. dollar cost of the original contract and the value of the
foreign currency in U.S. dollars upon closing of such contract is included in
net realized gain or loss on foreign currency transactions.
Forward currency contracts held by the Funds are fully collateralized by
other securities which are denoted in the accompanying Schedule of Investments.
Such collateral is in the possession of the Fund's custodian. The collateral is
evaluated daily to ensure its market value equals or exceeds the current market
value of the corresponding forward currency contracts.
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 32
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Currency gain and loss is also calculated on payables and receivables that
are denominated in foreign currencies. The payables and receivables are
generally related to security transactions and income.
Futures contracts are marked to market daily and the variation margin is
recorded as an unrealized gain or loss. When a contract is closed, a realized
gain or loss is recorded equal to the difference between the opening and closing
value of the contract. Generally, open forward and futures contracts are marked
to market for federal income tax purposes at fiscal year-end.
Foreign-denominated assets and forward currency contracts may involve more
risks than domestic transactions, including currency risk, political and
economic risk, regulatory risk, and market risk. Risks may arise from the
potential inability of a counterparty to meet the terms of a contract and from
unanticipated movements in the value of foreign currencies relative to the U.S.
dollar.
The Funds may enter into "futures contracts" and "options" on securities,
financial indexes, and foreign currencies, forward contracts, and interest rate
swaps and swap-related products. The Funds intend to use such derivative
instruments primarily to hedge or protect from adverse movements in securities
prices, currency rates or interest rates. The use of futures contracts and
options may involve risks such as the possibility of illiquid markets or
imperfect correlation between the value of the contracts and the underlying
securities, or that the counterparty will fail to perform its obligations.
Additional Investment Risk
Janus High-Yield Fund and Janus Flexible Income Fund may be invested in
lower-rated debt securities that have a higher risk of default or loss of value
due to changes in the economy or in their respective industry.
Dividend Distributions and Expenses
Dividends are declared daily and distributed monthly. Each Bond Fund bears
expenses incurred specifically on its behalf as well as a portion of general
expenses.
Federal Income Taxes
The Funds intend to distribute to shareholders all taxable investment income
and realized gains and otherwise comply with the Internal Revenue Code
applicable to regulated investment companies. Of the ordinary income
distributions declared for the year ended October 31, 1997, 100% were exempt
from federal income taxes for Janus Federal Tax-Exempt Fund and Janus Tax-Exempt
Money Market Fund.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
2. Investment Advisory Agreement and Other Transactions with Affiliates
The advisory agreement with the Bond Funds spells out the fee that the Funds
must pay. Each of the Funds are subject to the following schedule:
Average Daily Net Annual Rate Expense Limit
Fee Schedule Assets of Fund Percentage (%) Percentage (%)
- --------------------------------------------------------------------------------
Janus Flexible Income Fund First $300 Million .65 1.00*
Over $300 Million .55
- --------------------------------------------------------------------------------
Janus High-Yield Fund First $300 Million .75 1.00*
Over $300 Million .65
- --------------------------------------------------------------------------------
Janus Federal First $300 Million .60 .65*
Tax-Exempt Fund Over $300 Million .55
- --------------------------------------------------------------------------------
Janus Short-Term Bond Fund First $300 Million .65 .65*
Over $300 Million .55
- --------------------------------------------------------------------------------
* Janus Capital will waive certain fees and expenses to the extent that net
expenses exceed the stated limits.
Each of the Money Market Funds pays Janus Capital .20% of average daily net
assets as an investment advisory fee. Janus Capital has voluntarily agreed to
reduce its advisory fee for the Janus Money Market Funds to .10%. In addition,
each class of shares of each Money Market Fund pays Janus Capital an
administrative fee. This fee is .50%, .15%, and .40% of average daily net assets
for the Investor Shares, Institutional Shares, and Service Shares, respectively.
Janus Capital has voluntarily agreed to reduce the administrative fee to .05%
and .05% on the Institutional Shares and Service Shares, respectively. The
Service Shares have class-specific expenses called service fees and this fee is
.25%. All other expenses of the Money Market Funds, except Trustees fees and
expenses, audit fees and interest expenses, are paid by Janus Capital.
Janus Service Corporation ("Janus Service"), a wholly owned subsidiary of
Janus Capital, receives an annual fee of 0.16% of average net assets per fund
plus $4.00 per shareholder account from each Bond Fund for transfer agent
services plus reimbursement of certain out-of-pocket expenses.
Officers and certain trustees of the Funds are also officers and/ or
directors of Janus Capital; however, they receive no compensation from the
Funds.
DST Systems, Inc. (DST), an affiliate of Janus Capital through a degree of
common ownership, provides fund accounting and shareholder accounting systems to
the Funds through Janus Capital and Janus Service. Fees paid to DST for the
period ended October 31, 1997, are noted below.
DST Fees
- --------------------------------------------------------------------------------
Janus Flexible Income Fund $259,746
- --------------------------------------------------------------------------------
Janus High-Yield Fund 77,312
- --------------------------------------------------------------------------------
Janus Federal Tax-Exempt Fund 44,104
- --------------------------------------------------------------------------------
Janus Short-Term Bond Fund 50,229
- --------------------------------------------------------------------------------
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 33
<PAGE>
NOTES TO FINANCIAL STATEMENTS
3. Federal Income Tax
The funds have elected to treat gains and losses on forward currency
contracts as capital gains and losses. Other foreign currency gains and losses
on debt instruments are treated as ordinary income for federal income tax
purposes pursuant to Section 988 of the Internal Revenue Code.
Net capital loss carryovers noted below as of October 31, 1997, are available
to offset future realized capital gains and thereby reduce future taxable gains
distributions. These carryovers expire between October 31, 2001, and October 31,
2003. The aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income tax
purposes as of October 31, 1997, are listed below. The federal tax cost for the
Money Market Funds is the same as listed in the Statement of Assets and
Liabilities.
<TABLE>
<CAPTION>
at October 31, 1997 at October 31, 1997
------------------- ----------------------------------------------------------
Net
Net Capital Loss Federal Tax Unrealized Unrealized Appreciation/
Carryovers Cost Appreciation (Depreciation) (Depreciation)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Janus Flexible Income Fund -- $671,073,308 $25,092,998 ($1,885,567) $23,207,431
- -----------------------------------------------------------------------------------------------------------
Janus High-Yield Fund -- 272,434,736 8,863,976 (2,684,013) 6,179,963
- -----------------------------------------------------------------------------------------------------------
Janus Federal Tax-Exempt Fund ($1,420,783) 60,529,813 1,445,010 (9,981) 1,435,029
- -----------------------------------------------------------------------------------------------------------
Janus Short-Term Bond Fund (2,818,603) 56,278,899 432,889 (35,028) 397,861
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Net investment income distributions and capital gains distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are due to differing
treatments for items such as deferral of wash sales, foreign currency
transactions, net operating losses, and capital loss carryforwards. Permanent
items identified in the period ended October 31, 1997, have been reclassified
among the components of net assets as follows:
Undistributed Undistributed
Net Investment Net Realized Paid-In
Income Gains and Losses Capital
- --------------------------------------------------------------------------------
Janus Flexible Income Fund $183,992 ($182,697) ($1,295)
- --------------------------------------------------------------------------------
Janus High-Yield Fund 29,905 (29,905) --
- --------------------------------------------------------------------------------
Janus Federal Tax-Exempt Fund -- (985) 985
- --------------------------------------------------------------------------------
Janus Short-Term Bond Fund (1,108) 1,108 --
- --------------------------------------------------------------------------------
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 34
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of Janus Investment Fund
In our opinion, the accompanying Statements of Assets and Liabilities, including
the Schedules of Investments, and the related Statements of Operations and of
Changes in Net Assets and the Financial Highlights present fairly, in all
material respects, the financial position of Janus Flexible Income Fund, Janus
High-Yield Fund, Janus Federal Tax-Exempt Fund, Janus Short-Term Bond Fund,
Janus Money Market Fund, Janus Government Money Market Fund, and Janus
Tax-Exempt Money Market Fund (seven of the portfolios constituting the Janus
Investment Fund, hereafter referred to as the "Funds") at October 31, 1997, the
results of each of their operations, the changes in each of their net assets,
and the financial highlights for each of the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1997, by
correspondence with the custodians and brokers and the application of
alternative auditing procedures where securities purchased had not been
received, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
/s/Price Waterhouse LLP
Denver, Colorado
December 2, 1997
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 35
<PAGE>
THIS SPACE AVAILABLE FOR YOUR NOTES AND COMPUTATIONS
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 36
<PAGE>
THIS SPACE AVAILABLE FOR YOUR NOTES AND COMPUTATIONS
JANUS INCOME FUNDS OCTOBER 31, 1997 ANNUAL REPORT 37
<PAGE>
[Logo] JANUS
100 Fillmore Street
Denver, Colorado 80206-4923
1-800-525-3713
Funds distributed by Janus Distributors, Inc. Member NASD.
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